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Abstract:
Using a dataset on corporate governance ratings of 300 largest European companies from 17 countries, I analyse the dynamics of corporate governance between 2000 and 2003 focusing on convergence. Within the structure of corporate governance shareholders' rights and duties and take-over defences have changed little while ratings for board structure and functioning and particularly for disclosure have risen in every country and industry. Continental companies narrow the gap in relation to the UK and Ireland, and there is evidence of convergence within individual countries and industries. Nevertheless, the European corporate governance landscape is still diverse, with differences between countries overwhelming differences between industries.

Corporate governance, convergence, rating, Europe

Abstract:
We used the data on major holdings of voting rights in listed companies in 1997 and 2001 in order to research the dynamics of the German model of corporate governance. The change that took place in this short period of time is striking. The level of ownership concentration fell significantly, cross-holdings started to dissolve, and financial sector institutions, including the most powerful ones, lost their position as blockholders. The types of holders of voting rights in a company depend on its size, age, economic sector, and location. The concentration of voting rights is related primarily to the inclusion in DAX30 stock market index. We document a quick step of Germany towards the parameters of the Anglo-American corporate governance, but at the same time identify areas of strong persistence. There is a lot of diversity within the German model. Different types of companies and different regions have different corporate governance arrangements, with different development trajectories.

Corporate governance, blockholdings, Germany

Abstract:
This paper documents the relationship between cross-listing and corporate governance of the largest European companies between 2000 and 2003. Companies with a U.S. cross-listing, and particularly those listed on a U.S. stock exchange had higher corporate governance ratings than companies without a U.S. cross-listing. Corporate governance advantage of the U.S. cross-listed firms holds if we control for the country of origin and other company characteristics, and it was more consistent in 2003 than in 2000, suggesting a possible impact of the Sarbanes-Oxley Act. The U.S. cross-listed firms had higher ratings not only in terms of disclosure but also in terms of board structure and functioning. In contrast, they had no advantage in terms of shareholders' rights and duties. The advantage of U.S. cross-listed firms can be traced back to at least a couple of years before the time of cross-listing, which leaves the question whether their superior corporate governance is the effect of U.S. cross-listing open. In contrast to the importance of cross-listing in the U.S., there is no significant relationship between corporate governance and cross-listing within Europe. Implications are drawn for the debate on bonding and the future of European stock markets.

corporate governance, cross-listing, bonding, Europe, ADRs

Abstract:
Of the events signalling the end of the TMT bubble, scandals of corporate governance in the US and Europe captured the public imagination. In play were the greed and hubris of senior executives prompting further debate over countries' standards of corporate governance. If Enron and WorldCom were the US reference points, Ahold and Parmalat were the European instances. Ahold was especially important, being an instance of significant internal accounting and reporting failures and an instance of poor public disclosure of market-sensitive information. We report the analysis of market trading in Ahold stock in both Amsterdam and New York. It is shown that greater volatility in Amsterdam daily closing prices presaged the crisis to come in Ahold shares suggesting the leakage of information to privileged insiders. It is also shown that New York prices were inefficient not withstanding the advantages of a New York listing for the firm. Implications are drawn for the theory of global finance, and the nature and scope of convergence in national standards of corporate governance. It is argued that the co-existence of rather different regimes of governance may be undercut by the reaction of institutional investors in the global financial market place to the actions of corporate management.

Ahold, corporate governance, cross-listing, time-space market pricing

Abstract:
With the collapse of the TMT bubble and a number of high-profile scandals of corporate governance around the world, the language of finance is being re-written to include market inefficiency. Not surprisingly, there is an increasing premium on market information - national and international. As a consequence, the argument in favour of global standards has gained force, encouraged by new institutions such as the IASB. Co-existence of reporting standards seems a most unlikely prospect just as harmonisation may be less important than convergence to a set of standards deemed to be best practice in terms of global financial performance. With the increasing global significance of institutional investors and their portfolio managers, common standards set within well-defined parameters are clearly on the agenda; convergence is the name of the game rather than a tapestry of multi-coloured threads stitched together for the sake of expediency. In this paper, we develop these observations paying particular regard to the interests of institutional investors as well as the burgeoning market for global metrics not just national reporting standards.

Financial markets, globalization, information, institutional investors, global metrics, portfolio managers

Abstract:
Believed to be a robust alternative to Anglo-American market capitalism, the virtues of the German model are increasingly disputed as doubts are raised about its long-term prospects. At the core of the German model is a system of corporate governance characterized by concentrated ownership and cross-holdings of stocks amongst related firms and their financial service providers. When combined with worker representation on corporate supervisory boards, concentrated ownership is thought to encourage longer-term competitive and investment strategy. Using a unique data set on German corporate voting rights and insights gleaned from intensive interviews with German and international financial institutions, we analyse daily stock market prices over the period 1997 to 2001, testing for the value attributed to concentrated ownership by financial markets. We show that financial markets discount ownership concentration in ways consistent with Anglo-American conceptions of shareholder value rather than the logic of the German model. There is a significant negative relationship between ownership concentration and the average daily rate of return (as measured by closing stock market prices). This is an important finding for firms in the DAX 100, and is most pronounced for firms in the DAX 30. Implications of these findings for the continued significance of distinctive regional systems of accumulation are considered in the final sections of the paper.

German model, ownership concentration, stock returns, regions

Abstract:
For some, global finance is ubiquitous and penetrates into every corner of the world. In this case, the growth of advanced electronic communications coupled with top-down investment strategies has provided institutional investors entry into even the most sheltered of capital markets including those of continental Europe. By contrast, many economic geographers find this view of the world both simplistic with respect to the persistence of nation-state's very different regulatory traditions and highly misleading as to the most successful strategies for investing in continental Europe. In this paper, we provide evidence to support these claims, concentrating upon the issue of whether portfolio investment ought to be sectoral and top-down in orientation (assuming nation-states now matter less than ever before) or country-based and bottom-up in orientation (assuming that there continue to be reasons for taking geography seriously). The geography of market information is our point of departure, illustrated by reference to the evidence on rates of return to different kinds of investment strategies and by reference to the apparent informational content of stock market prices for two German companies Mannesmann (now Vodafone) and BMW (representatives of rather different regional models of capital accumulation). In more detail, we report the results of statistical analyses of the volatility of daily stock market prices for German DAX 30 and DAX 100 firms, arguing that their apparent characteristics have important lessons for the value and significance of bottom-up portfolio investment strategies. These results combined with the case studies of the two German firms are used to suggest that the geography of finance remains a vital component of global finance, an argument which has important implications for academic analysis as well as investment strategy.

capital market integration, informational efficiency, Europe, investment management

Abstract:
Global finance is often demonised by its critics; those critics may be well intentioned in that they speak on behalf of the welfare of working men and women. Critics may be also entrenched elites concerned with protecting their own power and privilege rather than the future welfare of society. The recent history of continental Europe can be written in terms of the encroaching power of global financial institutions set against regimes of accumulation hostage to the past. Remarkably, the recent history of continental Europe can be also written in terms of the companies, industries, and regions that have sought their own future through the market opportunities provided by global portfolio investment managers (amongst others). In this paper, the political economy of global finance is considered in the light of recent research on the evolution of corporate capitalism with applications for pan-European financial integration, the fragility of the German model, and the response of large firms to the imperatives driving global financial markets. Implications are drawn for conceptualizing the alchemy of finance, as well as its place in the emerging geopolitics of the 21st century.

History and geography, finance, continental Europe, Germany

Abstract:
In order to highlight the often-neglected significance of Internet in corporate governance, this paper offers a novel Internet Based Corporate Governance Rating, focusing on the disclosure of corporate governance on Internet and the use of Internet in corporate governance communication. The application of the Rating to the largest British and Polish corporations demonstrates that, while Polish companies generally lag behind the British firms, there are exceptions of Polish companies making a better use of Internet as a communication tool. Examples of good and bad practices are identified and a comparison of the IBCG Rating with conventional corporate governance ratings is presented, which underscores the distinctive character of the IBCG. Finally, the paper evaluates the limits of Internet use in corporate governance and discusses the implications of the results for the emergence of a global market for corporate governance as well as the processes of global financial integration.

corporate governance, Internet, transparency, shareholder activism, rating

Abstract:
This report summarises the scientific content and results of the European Science Foundation Exploratory Workshop on 'Economic Geography and European Finance' held at Jesus College, Oxford University, 16-19 September 2004. The objective of the workshop was to further our understanding of the links between finance and space in the European context, through a cross-examination of ideas between the growing field of economic geography and the geographical perspectives applied in other social sciences including financial economics, political science, sociology as well as management and business studies. With this objective in mind the workshop was organised as a series of six sessions: European finance between globalisation and localisation, stock markets, corporate governance, venture capital, financial centres and banking. The workshop papers stressed the complementarity between quantitative and qualitative research. Still little is known empirically about the spatial flows of capital and finance in Europe, partly due to the lack of comparative data. On the other hand, while we are witnessing is a rebirth of geography in academic literature on finance, there are definite limits of modelling and quantitative methodology traditionally applied in financial economics. As the workshop has highlighted real-world space escapes any easy quantification, and has to be treated as a multi-dimensional concept incorporating distance, political borders, cultural proximity, as well as inclusion in and exclusion from specific social networks. In addition, the workshop has identified promising areas for future interdisciplinary research on European financial markets and institutions.

Economic geography, European integration, financial centres, corporate governance, enlargement

Abstract:
This paper aims to contribute to the debate on the future of stock exchanges and financial centres by focusing on two questions. First, whether, how, why, and which stock exchange activities are prone to concentration in financial centres? Second, are they prone to concentration in national or international financial centres? Through a detail-rich analysis of stock exchange activities, including trading system, as well as relationships with members, issuers, and investors, I suggest a framework for the geography of stock exchanges based on two dimensions - proneness to concentration in a financial centre, and proneness to international consolidation. With this framework I make predictions about the future geography of stock exchanges arguing that while significant geographical reconfigurations are likely to unfold, driven primarily by the development of international networks of stock market institutions, stock exchanges and financial centres will remain crucially important for each other.

stock exchanges, financial centres, geography, networks

Abstract:
The paper introduces three measures of the international financial sector and presents the ranking of countries based on these measures. The International Finance Index measures the absolute size, the International Finance Location Quotient measures the level of development, and the International Finance Diversity Index captures the degree of diversity and specialisation of a country's international financial services sector. Empirical analysis is conducted for 41 countries using the data from the BIS, the WFE, the IMF, and stock exchanges on cross-border loans and deposits, international debt securities, cross-listed stocks, as well as foreign exchange and OTC derivatives. The analysis confirms the leading position of the UK in international finance, and a relatively weak position of Japan. The paper also discusses the applicability of the International Finance Index and its derivatives in academic and policy research concerned with international financial development, and competition between financial centres.

international finance, financial services, financial development, indices, loans, debt securities, stocks, foreign exchange, derivatives, financial centres

Abstract:
In this paper, we explore the path and interpretation of the Asian financial crisis (1997-1999). Much of the literature on the crisis has stressed issues of liquidity and market stability, the problems of determining cause and effect, and the role of institutions in amplifying or ameliorating the contagious effects of the crisis. By contrast, this paper seeks to understand the crisis through the eyes of the City of London. Relying upon material provided by The Financial Times and its' leading columnist Barry Riley, we construct an index of pessimism to chart the dominant City of London interpretation of the path of the crisis. This index is set against data on the actual performance of the Hong Kong, and Tokyo, London and New York stock markets over the same time period. Our goal is not to embarrass our representative columnist, showing how and why he was wrong about the consequences of the crisis for global financial stability. We have the luxury of retrospectively reconstructing the actual path of the crisis whereas Riley had to respond to specific events in a chain of apparently related events. Rather, our goal is to explain the construction of the dominant pessimistic interpretation of the path of the crisis, placing the City of London in the context of global markets (in time, between Tokyo and New York). In the penultimate section of the paper we report on an interview with Riley about the results of our analysis, emphasising the apparent homogeneity of information and opinion in the City of London as opposed to New York. The conclusion focuses upon the implications of this argument for the study of discontinuities between markets, and the future of financial centres.

Abstract:
The most powerful driver of regional and urban inequality in the UK for the past 15 years has been the economic success of the London region. Innovativeness in London does not arise primarily from technological initiatives, but from the labour intensive, knowledge-based processes characteristic of the city's internationally networked service functions. The financial services are often portrayed as leading these processes, with other professional and business services acting largely in their support. Yet the latter employ more people in central London, and serve a wider array of markets than suggested by this characterisation. This chapter compares the recent innovation experience of the financial services with other forms of KIBS innovation. Major similarities are noted in the need for market responsiveness, high quality labour, and flexible institutional arrangements, but important differences also emerge. These relate especially the influence of information and communications technology, the different forms taken by regulation, and the autonomy allowed KIBS firms by clients. The distinctive national and regional importance of non-financial KIBS innovation require greater attention, even though this poses some daunting methodological challenges.

Knowledge intensive business services, finance, innovation, London

Abstract:
This paper develops a series of stock market representativeness indices as a new method for analysing stock market development, and applies this method to data on stock markets and economies of thirty-one European countries, as well as Japan and the USA. The main conclusion is that stock markets poorly represent the underlying economies. Publicly traded companies constitute an absolute minority of the total population of large companies. In this respect the level of stock market representativeness in Europe is much lower than in the USA and Japan. Second, in Europe, the USA, and Japan stock markets are strongly biased towards very large companies, towards high technology companies, and particularly high technology knowledge intensive services, as well as towards companies from financial centres. They are biased against smaller, although still large companies, against lower technology manufacturing and less knowledge intensive services, and against provincial companies. Notwithstanding these general findings, stock market representativeness varies considerably between individual countries, highlighting the significance of country-specific factors. Research and development intensity, venture capital industry, asymmetric information, social networks, and government policy are explored as potential reasons for the stock market biases. Implications are drawn for European policy-makers, researchers, as well as financial firms.

stock markets, listing, Europe, USA, Japan

Abstract:
This paper analyses the role of proximity between investors and corporations with equity traded on public secondary equity markets. Combining insights from recent research on home and local bias in financial economics, with economic geographical research on proximity and financial markets, the paper argues that proximity, even if defined narrowly as geographical proximity, has significant implications for: investors (in terms of performance and trade-off with liquidity); investment industry as a whole (in terms of size, structure, and strategy); issuers (in terms of access to capital and liquidity); communities (in terms of herd behaviour and financial literacy); and policy makers (in terms of market structure, competition, and international harmonisation). The consideration for cognitive, social, organisational, and institutional proximity enriches the understanding of secondary equity markets, by complementing the analysis of geographical proximity, but does not make the latter redundant.

equity, home bias, local bias, investors, issuers, proximity, geography

Abstract:
In the last decade hundreds of companies from emerging markets have listed and issued their shares on American and European stock markets. Brazil, Russia, India, and China have been the main origins of issuers, and stock exchanges in the US, UK, and Luxembourg the main destinations involved in the process. These four home and three host markets are the empirical focus of our paper. We present an economic geography perspective on foreign listing, grounded in the geography of finance and the world city network approaches, emphasising the sub-national origins of foreign listed firms, the role of intermediaries, and competition for foreign listings. Our analysis, based on comprehensive up-to-date datasets on foreign listings and foreign equity issues, shows that issuers listing their shares abroad are predominantly large firms, coming from relatively high-growth, internationally oriented sectors, and headquartered overwhelmingly in the leading economic centres of their home countries. Key intermediaries in the foreign listing process are the global investment banks, operating out of the very same centres where the cross-listing firms and the host stock exchanges are located. Competition between host stock markets is affected significantly by the direct and indirect costs of foreign listing, including disclosure and corporate governance requirements. Both host markets and intermediaries exhibit a significant degree of specialisation in terms of the size, sector, and geographical origin of the issuers they serve. The market for foreign listing differs significantly between the BRIC countries, with the Chinese market offering the greatest potential, but facing considerable uncertainty.

foreign listing, stock markets, geography of finance, world city network, emerging markets

Abstract:
This paper shows that firms from financial centres are more likely to go public than their provincial counterparts. The financial centre bias is analysed for 32 countries, including the European Union, the USA and Japan. It is particularly strong in countries with underdeveloped stock markets and closed corporate governance regimes, but it is still present in countries with the most developed stock markets and most open corporate governance, such as the UK and the USA. Reasons for the bias include the benefits of issuers' proximity to IPO intermediaries and specialised labour markets, corporate governance incentives, and cultural factors.

IPOs, stock markets, financial centres, corporate governance, proximity

Abstract:
The paper investigates the link between stock markets and innovation, by focusing on the relationship between firms' innovativeness and their participation in public stock markets. It reviews theoretical and empirical literature on capital structure and going-public decision, combined with insights from innovation studies, to argue that there are no reasons, why a positive relationship between innovativeness and stock market participation should not apply to both manufacturing and services firms. This hypothesis is confirmed through the analysis of data from 30 European countries, as well as the USA and Japan, which shows that the positive relationship between innovativeness and stock market participation is actually stronger for services than for manufacturing firms. It is also shown that the relationship differs between countries as a reflection of their diverse institutions. It is weak or absent in countries where institutional environment of stock markets is weak, e.g. transition economies or Italy, and pronounced where institutions are particularly stock market friendly e.g. the USA and the UK. Finally, the paper shows that while the Internet boom brought hoards of innovative firms to stock markets, the positive relationship between innovativeness and stock market participation is likely to have existed before. Implications are drawn for research on the impact of financial structure on innovation and growth.

innovation, stock market, equity, institutions, services, Internet boom

Abstract:
This paper conceptualises securitisation from an economic geographic perspective, and documents dynamic but volatile growth of the securities industry and its distribution in the U.S.A. between 1998 and 2007. The industry has spread across states and metropolitan areas, within which it has enhanced its position in central districts, crowding out credit and insurance industry. Corporate headquarters have become more concentrated and their distribution has become more similar to the location of the securities industry centres. The results have implications for a revision of the global city theory, and corroborate research on the geography of stock markets and financialisation.

securitisation, financial centres, securities industry, geographic concentration

Abstract:
This paper explores philanthropic finance by analysing data on the sizes and structures of the 20 highest-giving private foundations in the United States, the United Kingdom, Germany, and Japan in 2005. It is shown that socio-cultural rather than purely economic indicators are better predictors of private foundation giving. Foundations in the four countries show similarities in terms of age, geographic scope, areas of funding and lack of performance measurement. Methods of income generation, asset management, and capital deployment however, differ significantly between countries. We suggest that while philanthropic culture and governance exist, they bear the features of national business culture and governance. Conclusions are drawn for the feasibility of competition and collaboration, as well as the use of performance metrics, among private foundations.

economic geography, finance, philanthropy, foundation, governance, culture

Abstract:
The academic community seems divided into two camps: those who emphasise global finance and capital market integration and those that emphasize the economic geography of distinctively local regimes of accumulation. In the first instance, flows of capital and the corrosive forces of global economic competition are assumed to drive institutional convergence. In the second instance, the stability of relationships and inherited institutions presuppose the necessity of path dependence. There is hardly ever dialogue between these camps except for mutual disregard and antagonism. In this paper, we seek a rapprochement between these two world-views. In doing so, we focus on recent developments in continental Europe and particularly Germany. In contrast with Anglo-American expectations, we argue that the German model is hardly a model at all; it has a distinctive economic geography apparent in capital market structure and performance. We also argue, moreover, that the past is not the future: there is evidence of the adoption of financial practices and institutions consistent with the Anglo-American model and inconsistent with the inherited German model. Our goals are twofold. We demonstrate the significance of economic geography for understanding German capital market structure and we seek to explain how path dependence may unravel and the forces driving institutional convergence can emerge within the context of the past. In this respect, our goals are both empirical and theoretical and have implications for conceptualising the status and significance of economic geography.

corporate governance, path dependence, Germany

Abstract:
Institutional investors, primarily pension funds, dominate global financial markets. Increasingly, these investors are turning their attention to emerging markets and applying both traditional financial and non-financial metrics to their investment decisions. Following the 1998 Asian Financial Crisis, many large institutional investors have come to believe non-financial attributes, particularly in emerging markets, can both indicate potential equity premia and more importantly, be used as risk management tools within investment portfolios. These investors apply non-financial criteria not only to individual firms in emerging markets, but also to whole countries' corporate practices. Countrywide indices such as PricewaterhouseCoopers' Opacity Index back up such investor intuition. While countries and their regulatory regimes are central to external capital investment decisions, convergence to global standards occurs when key actors in the investment value chain demand levels of corporate and social behaviour greater than those currently consistent with countries' regulatory frameworks. We establish this claim through three critical pieces of analysis. First, we show that countries' legal origins are no longer strong determinants for achieving the global standards required for investment in emerging markets (for importance of legal origin see La Porta et. al. 1997). Second, we demonstrate that emerging market countries, when excluded from foreign investment, improve their corporate practices and standards in order to attract that investment in the future. Third, we find that convergence to global standards is not strongly influenced by the wealth of the emerging market country, but rather as a direct reaction to exclusion from foreign investment in the previous period. We examine country-specific investment decisions taken by institutional investors in emerging markets with particular reference to the California Public Employees Retirement System (CalPERS) to test this hypothesis.

Country screening, global standards, CalPERS

Abstract:
The level and determinants of cross-border holdings are evaluated using data on the ownership structures of 711 MSCI index companies in 16 European countries. The level of foreign ownership in the 16 countries is significant, but spread unevenly, with US financial institutions controlling the majority of foreign stakes. Countries' borders, rather than company size ranges are the main lines of discrimination between high and low levels of foreign corporate ownership. Major factors influencing the intensity of cross-border links include the proximity of investors to the destination of capital, and corporate governance. From the perspective of international corporate ownership, the level of capital market integration in Europe is low and the concept of the pan-European company remains a long way from being realised. Implications are drawn for future research and integration policy.

Capital market, European integration, corporate ownership, corporate governance

Abstract:
Data on major voting blocks in the German officially listed companies for the end of 1997 and May 2001 is used in order to explore the spatial dimensions of the system of corporate control. Listed companies are very unevenly distributed, and their institutional and geographical concentration has not decreased. Holdings of voting blocks in companies are, in turn, getting more and more dispersed, but the majority of corporate control is still intra-regional, with the holders of voting rights coming from the same Lander as the controlled corporations. Gravity equations show that distance is a very strong determinant of corporate control links, and its role applies to all types of companies and holders, though to a varying degree. From the perspective of corporate control, the German capital market is very regionalised. Considering that the study spans a short period of time, however, the pace of integration is pronounced.

Capital market integration, Corporate control, German Lander