Theories of Financial Intermediation: Evaluation and Empirical Relevance

Objective: The process of credits transfer is often facilitated by the financial intermediaries, including banks and non-bank institutions. his article offers an insight on the various theories of intermediation. The first scrutinises the various theoretical conceptualizations found in varied models which demonstrate the roles of intermediaries. The second offers a concise discuss on the relevance of the theories to current situation of intermediation and intermediaries in Nigeria. Method: The paper is based on theoretical reviews. The study used the approach to appraise the issues on financial intermediation and of intermediaries. Result and Discussion: The study finds that financial intermediation is fast changing as new types of economic players enter and new financial tools evolve. Moreso, that the financial markets have become more dominated by extensive intermediaries. We note that the development cryptocurrencies have largely affected the ways of intermediation, and this has effect on asset pricing theory. Implications: The theory and evidence on financial intermediation have important implications for the capital market. Originality: The study offers information related to theoretical perspectives on financial intermediation and intermediaries. The value of the paper is evidenced by the fact that it provides background on financial intermediation and intermediaries. Recommendations: The paper concludes that other means of intermediation that involve decentralised exchanged are continuously developing and this has implications for the current theory of intermediation. The study recommends the need for development of more details theory that consider the nature and effect of decentralised finance and decentralised exchange on the optimality of capital allocation.