The rise of international financial centres in bank-based and market-based financial systems
- Author(s)
-
DOIhttp://dx.doi.org/10.21511/bbs.13(4).2018.15
-
Article InfoVolume 13 2018, Issue #4, pp. 161-172
- 1912 Views
-
481 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
“International Financial Centres” (IFCs) such as London or New York are one of several contributing factors toward the continued economic success of their respective countries in the twentieth-century. Other countries have attempted to create their own IFCs with mixed successes. This study examines factors that might predict the appearance of IFCs and the differences in financial scale. Of particular interest is the debate between ‘bank-based’ versus ‘capital-based’ financial systems and how it impacts the growth and success of IFCs. Results suggest that bank-based systems are marginally more effective at promoting and benefitting from IFCs. Stronger financial market regulations are also positively associated with the growth of IFCs and the resulting benefits that they provide to the rest of the economy. Together, this suggests that the optimal policy mix to promote IFCs may involve some degree of government involvement beyond strictly maintaining free and fair financial markets for the private sector.
- Keywords
-
JEL Classification (Paper profile tab)F21, G15, G28
-
References58
-
Tables3
-
Figures2
-
- Figure 1. Average total TMC and TBA of cities with at least one registered stock exchange and the ratio of TMC to country-GDP
- Figure 2. Average total TMC and TBA of cities with at least one registered stock exchange and percentage change in TMC from the previous ranked entry
-
- Table 1. Probit regression of financial centre indicator against selected explanatory factors
- Table 2. The effect of financial centre status and other selected explanatory factors on GDP per capita and percentage of jobs in finance and business
- Table 3. The effect of Total Market Capitalisation, Total Bank Assets, and other selected explanatory factors on GDP per capita and percentage of jobs in finance and business
-
- Acuto, M. and Steele, W. (2013). The Palgrave Macmillan Global City Challenges: Debating a Concept, Improving the Practice. New York: Palgrave Macmillian
- Allen, F. and Gale, D. (1999). Corporate Governance and Competition. Centre for Financial Institutions Working Papers 99-28. Wharton School Centre for Financial Institutions, University of Pennsylvania.
- Allen, F. and Gale, D. (2000) Optimal Currency Crisis. Carnegie-Rochester Conference Series on Public Policy. Elsevier 53(1), 177-230.
- Arestis, P., Demetriades, P. O. and Luintel, K. B. (2001) Financial Development and Economic Growth: The role of stock markets. Journal of Money, Credit and Banking. 33(1), 16-41.
- Barth, J. R., Caprio, G. Jr. and Levine, R. (2013). Bank Regulation and Supervision in 180 Countries from 1999 to 2011. World Bank Policy Research Working Paper 2725.
- Barth, J. R., Gan, J. and Nolle, D. E. (2009). Global Banking Regulation and Supervision: What are the issues and what are the practices? (Financial Institutions and Services Series). Washington DC: Nova Science Publishers
- Beaverstock, J. V., Smith, R. G. and Taylor, P. J. (2000). World City Network: A new metageography. Annals of the Association of American Geographers. 90(1), 123-134.
- Beck, T., Demirguc-Kunt, A. and Levine, R. (2003). Bank Supervision and Corporate Finance. NBER Working Papers 9620, National Bureau of Economic Research, Inc.
- Beck, T. & Levine, R. (2004). Stock Markets, Banks, and Growth: Panel evidence. Journal of Banking & Finance. 28, 423-442.
- Bertus, M., Jahera, J. S. and Yost, K. (2007). The Relation Between Bank Regulation and Economic Performance: A cross-country analysis. Banks and Bank Systems 2(3), 32-45.
- Bhide, A. (1993). The Hidden Cost of Stock Market Liquidity. Journal of Financial Economics. 34(1), 31-51.
- Bishop, J., Kent, C., Plumb, M. and Rayner, V. (2013). The Resources Boom and the Australian Economy: A sectoral analysis. Reserve Bank of Australia.
- Busse, M. and Groizard, J. L. (2008). Foreign Direct Investment, Regulations and Growth. The World Economy, 31(7), 861-886.
- Boyd, J. and Prescott, E. (1986). Financial Intermediary Coalitions. Journal of Economic Theory 38, 211-232.
- Bryant, M. (2010). Toronto as Centre of Global Finance?
- Calvo, G. A., Izquierdo, A. andTalvi, E. (2006). Phoenix Miricales in Emerging Markets: recovering without credit from systemic financial crises. BIS Working Papers 221.
- Cassis, Y. (2006). Capitals of Capital: The rise and fall of International Financial Centres 1780-2009. New York: Cambridge University Press.
- Cassis, Y. (2011). Crisis and Opportunity: The shaping of finance. New York: Oxford University Press.
- Cheung, L. and Yeung, V. (2007). Hong Kong as an International Financial Centre: Measuring its position and determinates. Working Paper 14/2007: Hong Kong Monetary Authority.
- Corbett, J. and Jenkinson, T. (1996). How is Investment Financed? A study of Germany, Japan, the United Kingdom and the United States. The Manchester School of Economic and Scoial Studies, University of Manchester, 65(0), 69-93.
- Demirguc-Kunt, A., Feyen, A. and Levine, R. (2011). The Evolving Importance of Banks and Securities Markets. Policy Research Working Papers 5805, The World Bank.
- Demirguc-Kunt, A. and Levine, R. (2001). Bank-based and market-based Financial Systems: cross-country comparisons. Policy Research Working Paper 2143, The World Bank.
- Demirguc-Kunt, A., Feyen, A., & Levine, R. (2011). The evolving importance of banks and securities markets (Policy, Research Working Paper No. 5805). Washington, DC: The World Bank.
- Djankov, S., McLiesh, C., & Shleifer, A. (2006). Private credit in 129 countries (NBER Working Paper Series No. 11078).
- Dorrucci, E., Meyer-Cirkel, A., & Santabarbra, D. (2009). Domestic development in emerging economies. European central bank (Occasional Paper Series No. 102).
- Elliot, M. (2008). A tale of three cities. TIME.
- Fraser Institute (2018). Economic Freedoms of the World (EFW) indices.
- Gehrig, T. (2000). Cities and the geographies of financial centres. In J. M. Huriot & J. F. Thisse (Eds.), Economies of cities: theoretical perspectives. Cambridge: Cambridge University Press.
- Gilliland, A. (2013). Choosing the federal capital: a comparative study of the United States, Canada and Australia. In The problem of the capital city. Barcelona: Institut d’Estudis Autonomics.
- Gordon, B., Blomquist, J., Yu, X., & Burnett, N. (2003). Social safety net priorities in East Asia. In C. Park & K. W. Lee (Eds.), Globalization and social safety nets in the Asia-Pacific region. Seoul: APEC.
- Hicks, J. A. (1969). A theory of economic history. Oxford: Claredon Press.
- Huat, T. C., Lim, J., & Chen, W. (2004). Singapore as a financial centre: development and prospects. Paper presented at the saw centre for financial studies and ISEAS conference, Singapore.
- Jacobzone, S., Steiner, F., Ponton, E. L., & Job, E. (2010). Assessing the impact of regulatory management systems: preliminary statistical and econometric estimates (OECD Working Papers on Public Governance, No. 17).
- JuriGlobe (n. d.). Legal Systems Classification.
- Kindleberger, C. P. (1974). The formation of financial centres: a study of comparative economic history. Princeton: Princeton University Press.
- La Porta, R., Lopez‐de‐Silanes, F., & Shleifer, A. (2006). What works in securities laws? The Journal of Finance, 61(1), 1-32.
- La Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., & Vishny, R. W. (1998). Law and finance. Journal of Political Economy, 106(6), 1113-1155.
- Levine, R. (2002). Bank-based or market-based financial systems: which is better? Journal of Financial Intermediation 11(4), 398-428.
- Levine, R., & Zervos, S. (1998). Stock Markets, Banks, and Economic Growth. The American Economic Review, 88(3), 537-558.
- Long, J. A., & Tan, D. (2010). The growth of the private wealth management industry in Singapore and Hong Kong. Capital markets law journal, 6(1), 104-126.
- McGuire, S., & Chan, M. (2000). The NY-LON life. Newsweek, 40-47.
- Ngiam, K. J. (1996). Singapore as a financial center: new developments, challenges, and prospects. In I. Takatoshi & A. O. Krueger (Eds), Financial deregulation and integration in East Asia. Chicago: University of Chicago Press.
- Noble, J., & Rabinovitch, S. (2014). Link with Shanghai major victory for Hong Kong exchange. The Economist.
- Parker, D., & Kirkpatrick, C. (2012). Measuring regulatory performance (OECD Expert Paper No. 2). Paris: The Organisation for Economic Co-operation and Development.
- Pavoni, S. (2013). London leads again. IFC rankings. The Banker, 192-196.
- Porteou, D. (1999). The development of financial centres: location, information externalities and path dependence. In R. Martain (Ed.), Money and the space economy (pp. 96-114). Chichester: John Wiley & Sons Ltd.
- Robinson, J. (1952). The Generalization of the General Theory in the Rate of Interest and Other Essays. London: Macmillan.
- Rossi, V. (2009). Which Sectors Will Lead the Recovery? Chatham House Briefing Note.
- Sassen, S. (1991). The Global City: New York, London, Tokyo. Princeton: Princeton University Press.
- Sassen, S. (1999). Global Financial Centres. Foreign Affairs, 78(1), 75-87.
- Stigler, G. J. (1964). Labour and Capital. In Capital and Rates of Return in Manufacturing Industries, 92-104.
- Tan, C. H., & Lim, J. Y. S. (2007). Singapore and Hong Kong as Competing Financial Centres. Singapore: Saw Centre for Financial Studies.
- Verdier, D. (2002). Moving Money: Banking and Finance in the Industrialised World. Cambridge: Cambridge University Press.
- Wall, R. S., & van der Knaap, G. A. (2011). Sectoral differentiation and network structure within contemporary worldwide corporate networks. Economic Geography, 87(3), 267-308.
- Wintersteller, M. (2013). Luxembourg’s financial centre and its deposits. ECFIN Country Focus, 10(9).
- Wojcik, D. (2011). The global stock market: issuers, investors, and intermediaries in an uneven world. Oxford: Oxford University Press.
- Wojcik, D. (2013). The dark side of NY-LON: financial centres and the global financial crisis Urban Studies, 50(13), 2736-2752.
- Z/Yen Group (2005). The competitiveness position of London as a global financial centre. London: Long Finance.
-
Estimation of fintech market in Ukraine in terms of global development of financial and banking systems
Józef Antoni Haber
,
Iryna D’yakonova ,
Ann Milchakova
doi: http://dx.doi.org/10.21511/pmf.07(2).2018.02
Public and Municipal Finance Volume 7, 2018 Issue #2 pp. 14-23 Views: 1630 Downloads: 375 TO CITE АНОТАЦІЯThis paper examines the fintech concept and fintech market structure. The theoretical and methodological approaches to the adaptation of the Ukrainian banking market to fintech in terms of globalization are investigated. The problems of Ukrainian banking system reforming after the national economy long-term recession are determined. Phases of technology development in the Ukrainian banking system are considered and fintech innovations in Ukraine are discovered.
-
Spatial tale of G-7 and BRICS stock markets during COVID-19: An event study
Sanket Ledwani 
,
Suman Chakraborty ,
Sandeep S. Shenoy
doi: http://dx.doi.org/10.21511/imfi.18(2).2021.03
Investment Management and Financial Innovations Volume 18, 2021 Issue #2 pp. 20-36 Views: 1203 Downloads: 500 TO CITE АНОТАЦІЯThe unprecedented outbreak of COVID-19 has affected every aspect of the human life, be it health, social, or economic dimensions. The anxiety and uncertainty wobbled the economies of affected countries worldwide. This study attempts to quantify the impact of COVID-19 on the performance of major stock markets of G-7 nations vis-à-vis BRICS nations. An event study methodology is employed to capture the effect of the systematic event in the form of Buy and Hold Abnormal Returns (BHAR) and Average Buy and Hold Abnormal Returns (ABHAR). The study considers a 90-day observation window, consisting of six sub-event windows after the COVID-19 news up-doves the world, and 120 days prior to the selected event date to estimate average expected returns. BHAR values in the four event windows are statistically significant, covering stock markets from panic and nosedive to their correction and recovery. ABHAR values reported are significantly negative in the event window ranging from –0.15% to –38.43% for G-7 and –0.06% to –37.12% for BRICS nations. Despite similar ABHAR trends, the BHAR values and correlation matrix exhibit a diverse reaction in BRICS nations compared to the highly synchronized reaction in the G-7 group of nations in the COVID period.
-
The prestige of stock exchanges and corporate cash holding in transition economies: a study on Vietnamese listed firms
Do Thi Thanh Nhan , Ngo Minh Vu , Pham Ha , Drahomíra Pavelková
doi: http://dx.doi.org/10.21511/imfi.14(3-1).2017.04
Investment Management and Financial Innovations Volume 14, 2017 Issue #3 pp. 199-209 Views: 1011 Downloads: 229 TO CITE АНОТАЦІЯThe main purpose is to examine the relationship between corporate cash holding level and the prestige of the stock exchanges. And the other determinants in the listing requirements impact on cash holding level will be indicated. The paper uses a sample of 577 listed firms excluding the financial institutions on the Vietnamese stock exchange over the period 2007–2015. The results show that the listed firms on the stock exchange with higher prestige hold larger amount of cash reserve and vice versa. The study shows that there is a statistically significant connection between cash holding and the listing requirements such as profitability, dividend and information disclosure. The findings have implications on the cash management of listed firms in the stock exchanges with dissimilar prestige.
