The Economic Role of Finance: A Contribution to the the Kay Review of UK Equity Markets and Long-Term Decision Making

Abstract

This contribution is written by a number of participants and directors of the Network for Sustainable Financial Markets (NSFM), an international, non-partisan, non-profit organization comprised of financial market professionals and academics. We strongly welcome the Kay Review, in which the mechanisms of corporate control and accountability provided by UK equity markets are examined for their effect on the long term competitive performance of UK businesses. We believe it could have a significant positive impact in the UK but also important knock-on international effects, especially with regard to countries following the Anglo-Saxon model.

In light of the financial crisis and continuing instabilities in developed market economies, we expect normative debates about how to create healthy economies to become more prominent. The perspective we bring is a sample of perspectives from NSFM. Acting outside of organisational affiliations and thus with reduced agency interests, we believe informed practitioners and commentators are well suited to identify current systemic problems and help to develop communities of practice within financial institutions to address those problems. It is in that spirit that we provide the following views, culled from the work and insights of many of our colleagues in NSFM.

Keywords: Corporate Governance, Kay review, NSFM, Long term investing, equity markets

JEL Classification: G30