Competition & Change

This paper explores philanthropic finance by analysing data on the sizes and structures of the 20 highest-giving private foundations in the US, the UK, 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.

Countries around the world are developing carbon emission markets as a governance mechanism to reduce greenhouse gas emissions and mitigate anthropogenic climate change. These markets are social institutions, designed to solve the transnational collective action problem of climate change. This paper explores the development of carbon emission markets from an institutional perspective to understand how market networks specifically and social institutions in general are constructed. Drawing on seminal work of institutional theorists and economic sociologists, this paper explores the way in which organizations build the institution of the carbon markets. As this paper aims to demonstrate, a number of public and private organizations, rather than regulatory bodies, build and operationalize the market. The paper analyses how networks of organizations develop the three pillars of the carbon market institution: regulative, normative and cultural-cognitive constructs. Since organizations build the institutional pillars of the carbon market network, the strength of the institution cannot be determined by regulation alone. Certainly regulation gives the carbon markets credibility, but their ability to become an institution of common practice relies on the strength and embeddedness of the organizations that build them. The paper concludes by suggesting that, while the carbon market institution serves to communicate and disseminate a common social value of reducing emissions, it generates a dangerous over-reliance on markets to address environmental concerns.

The European Commission persists in implementing the Directive on Takeover Bids despite continuing opposition from many member states. This persistence is partly a reflection of the influence exercised by the agency theory of corporate governance and partly a reaction to the emergence of institutional investors as a dominant force in the European capital market. Since these investors prefer to limit shareholdings in companies and since it is a central tenet of agency theory that minority shareholders can only effectively control company managers if they have the takeover weapon at their disposal, it would seem to follow that the European Commission has to create an active takeover market in Europe if it wants to succeed in promoting the interests of institutional investors. This paper argues that the Commission's line of reasoning is wrong. As a result of changes in the scale and structure of institutional asset management and of the corresponding changes in the way that corporations are monitored and compared, the European capital market has acquired a new and direct power of attraction over European companies. Given that institutional investors can already control companies through the gravitational pull of their collective actions, it follows that they do not need to use the hostile takeover weapon as a means of leveraging up their control. Our conclusion is that the European Commission should abandon its attempt to create an active takeover market in Europe on the grounds that this policy not only does not advance the interests of institutional investors but also gets in the way of those policies that do advance their interests.

The current crisis confirmed that highly financialized regimes of accumulation are extremely crisis-prone. Most of the literature on financialization is focused on the economies of the centre. This paper analyses the peculiarities of financialization in the periphery, which is characterized by a high degree of extraversion and/or by considerable socio-economic heterogeneity. The theory of regulation permits analysis of different forms of financialization and the social dynamics linked with them. In contrast to Keynesian approaches, the state, international organizations and social forces shaping norms and policies are an explicit part of the theory. This allows for looking at policy-making within the analysis. Such an analysis enables us to explain policy changes (or lack of them) that are crucial for the processes of financialization and de-financialization in the periphery.

This paper investigates how financialization pressures in Eastern Europe shaped vulnerabilities to the 2007 global deleveraging and to what extent policy responses to crisis have sought to reinforce or delink from financialization. It explores the technical devices underpinning financialization, linked to the dominance of carry-trade strategies in foreign-owned banks and nonresident investors, validated by a set of central bank practices that changed the relationship between wholesale money markets and currency markets. Three distinct periods in the timeline of crisis show that central bank interventions were crucial in resuscitating financialization and that attempts to re-embed finance cannot be successful if public debt dynamics are neglected.

Insofar as the global crisis of 2007–09 can be understood as a fully-fledged crisis of the financialization era, it has presented new challenges for central banks. However, this paper argues that the central banks' interventions in key middle income countries (Brazil and Korea) have reinforced the main characteristics of financialization and have been different from their previous foreign exchange crisis of the late 1990s. The key reasons for this sharp contrast in central bank interventions can be found in the origins of the recent crisis — in developed financial markets — which is different from the previous one which originated in emerging markets. Furthermore, the higher level of financial integration of both economies in relation to the late 1990s is a more important factor. The Korean and Brazilian experiences show that liquidity management by central banks has been conditioned by international capital flows, and more importantly they have reinforced this trend through their operations in spite of differences in the dynamics of capital flows, in their timing of reserve accumulation and in their level of financial integration.

Despite sound macroeconomic fundamentals, the Brazilian currency, the real, experienced one of the world's largest exchange rate depreciations during the recent international financial crisis. This depreciation resulted from Brazil's rising ‘international financialization’, i.e. the increased participation of foreign investors in short-term domestic Brazilian assets. One important manifestation of this process, in particular, was the increased internationalization of the Brazilian real, which has become one of the most widely traded emerging-market currencies. However, the rising influence of international investors on Brazil's domestic currency weakened its exchange rate management during the international financial crisis as rapid international portfolio adjustment led to the real's sharp depreciation. Such exchange rate volatility has important implications for macroeconomic policy, especially exchange rate management, since, in the presence of increased international financialization, the standard prudent macroeconomic management that has been advocated by mainstream economics will prove inadequate — and might even undermine efforts — to maintain financial stability.

Analysis of empirical evidence from three Indian states suggests that financial inclusion strategies may be inefficient if designed without accounting for the government social protection programmes. Social protection programmes generate additional needs for financial services among the poor, meeting which can also deepen the impact of such programmes. Being a government department and the largest financial service-providing network, India Post may be most suitably located to implement such synergistic strategies. An examination of the official data on India Post indicates that the approach of diversifying its financial products to target higher-end clients in largely urban areas may not be appropriate due to its competitive disadvantage. We argue that delivery of financial services through post offices, built around social protection, may contribute to financial inclusion in rural areas while improving revenues of India Post.

This paper reviews the quarter century of the Istanbul Stock Exchange (ISE) since its opening in 1985. The review focuses on the ISE's articulation to the global financial system in two different macro-economic modalities in the 1990s and the new millennium and its repercussions for domestic retail investors (DRIs). It is argued that macroeconomic business cycles and inadequate institutionalization of the ISE in the 1990s and early 2000s have generated a domestic investor profile which is short-termist, opportunistic and relatively ill-informed about the markets in general and fundamentals of equity investment in particular. The post-2000-01 crisis period has structurally transformed the Turkish economy and boosted the ISE's performance with a new wave of global institutional investor interest. Despite these positive changes, the domestic retail investor profile of the 1990s has largely remained the same in the present decade but with positive aggregate market returns for domestic investors and better and more democratic access to market information and knowledge.