Gravity in International Finance: Evidence From Fees on Equity Transactions

We shed light on the impact of institutional quality and information barriers on trade in financial services using a novel panel data set on revenue earned on domestic and crossborder equity securities underwriting transactions. Our data set covers 91,51

The network boundary specification problem in the global and world city research: investigation of the reliability of empirical results from sampled networks

Despite the well-known dependence of vertex and network structural parameters on network boundary specification employed by researchers, there has so far been effectively no discussion of this methodological caveat in the global and world city literature. Given the reliance of empirical studies of urban networks on the sampling of underlying actors that form these networks by their interactions, we consider it of key importance to examine the dependence of network centralities of cities on network boundary specification. We consider three distinctive modelling approaches based on: (a) office networks, (b) ownership ties and (c) inter-organisational projects. Our results indicate that city network centralities obtained from sampled networks are highly consistent with those obtained from whole network analysis for samples featuring as little as 4% (office networks), 10% (ownership ties) and 25% (inter-organisational projects) of the underlying actors

Financial centre bias in sub-sovereign credit ratings

We investigate whether credit rating agencies are biased towards areas with strong financial centre characteristics, using data for 259 areas from 39 countries for 2004–17. We employ a range of measurements of financial centre characteristics, including a financial centre index, the share of financial and business services in an area’s total employment, and revenues from investment banking. For all financial centre proxies, our results confirm the existence of a ‘financial centre bias’ that is statistically and economically significant. For example, cities present in the global financial centre index have a rating about a category higher than would be justified by fundamentals

The spatial reach of financial centres: An empirical investigation of interurban trade in capital market services

This article investigates the spatial patterns of interurban trade in capital market services by analysing 16,324 trade links involving advisers and clients in the Visegrád Four plus Austria and their counter-parties worldwide between 2000 and 2014. We aim to address a gap in the research on financial centres and interurban trade by providing empirical evidence on the relationship between the complexity of services and the size of market areas across which they are traded. We utilise recent contributions to Central Place Theory (CPT), which provide us with suitably general models of interurban trade applicable to financial services. The key proposition of CPT in this respect is that more complex services are traded across larger market areas, thus translating into a further spatial reach of service centres. Given that these propositions are derived at a very general level, we rely on global city theory for explaining the underlying causal mechanisms in the context of capital market services. Our analysis examines the geography of adviser–client trade links to investigate how spatial patterns of interurban trade in capital market services are shaped by the characteristics of the services traded. We uncover evidence that more complex and larger transactions are associated with higher distance between clients and financial services providers. This in turn means that more complex services are traded across larger market areas. While clients in Central and Eastern Europe can generally find suitable providers for less complex capital market services locally, they often rely on financial services providers globally for the most complex transactions

Fin vs. tech: are trust and knowledge creation key ingredients in fintech start-up emergence and financing?

We investigate how the emergence of fintech start-ups and their financing is shaped by regional knowledge creation and lack of trust in financial services incumbents across 21 OECD countries, 226 regions and over the 2007–2014 period. We find that knowledge generated in the IT sector is much more salient for fostering new fintech start-ups than knowledge generated in the financial services sector. Additionally, the importance of new knowledge created in the financial services sector (IT sector) increases (decreases) as fintech start-ups grow and seek financing. When the level of trust in financial services incumbents falls within a region, this is followed by an increase in the financing provided to fintech start-ups. Nevertheless, regions with historically low average levels of trust in financial services incumbents attract less fintech investment overall

Cluster dynamics of financial centres in the United Kingdom: Do connected firms grow faster?

This study investigates the connection between network centrality and firm growth on a sample of 3,224 financial services firms located in the United Kingdom in the aftermath of the global financial crisis. Our findings, based on a spatial econometric model of long-term firm growth, indicate that firms that span structural holes, engage in co-management appointments and have network connections to related companies in other financial centres grow faster. In contrast, such connections generate substantial negative indirect effects on proximate firms, leading to a divergence of growth rates between globally connected and locally embedded firms

Spatial reach of financial centres: An empirical investigation of interurban trade in capital market services

This paper investigates the spatial patterns of interurban trade in capital market services by analysing 12,473 trade links among clients in the Visegrád Four plus Austria and financial services providers worldwide between 2000 and 2014. We aim to address a gap in research on financial centres and interurban trade by providing empirical evidence on the relationship between complexity of services and the size of market areas, across which they are traded. We utilise recent contributions to Central Place Theory (CPT), which provide us with suitably general models of interurban trade applicable to financial services. The key proposition of CPT in this respect is that more complex services are traded across larger market areas, thus translating into a further spatial reach of service centres. Given that these propositions are derived at a very general level, we rely on global city theory for explaining the underlying causal mechanisms in the context of capital market services. Our analysis examines the geography of adviser-client trade links to investigate how spatial patterns of interurban trade in capital market services are shaped by the characteristics of the services traded. We uncover evidence that more complex and larger transactions are associated with higher distance between clients and financial services providers. This in turn means that more complex services are traded across larger market areas. While clients in Central and Eastern Europe can generally find suitable providers for less complex capital market services locally, they often rely on financial services providers globally for the most complex transactions

Connectivity and growth: financial centres in investment banking networks

We investigate the effect of urban network connectivity on the growth of financial centres. While existing research recognizes the importance of network connectivity to firms, clusters as well as city-regions, large sample empirical evidence is currently scarce, particularly in the context of financial services. We contribute to this debate by studying underwriting of equity and debt securities, which represent some of the core activities of financial centres. We operationalise our analysis using a proprietary dataset collated from Dealogic Equity Capital Market and Debt Capital Market databases covering over 1.7 million interactions of investment banks with issuers across 540 cities globally during the 1993–2016 period. We estimate our regression equations using the System Generalized Method of Moments estimator, which allows us to obtain consistent coefficient estimates on potentially endogenous regressors, including network connectivity variables. We identify a clear pattern of positive association between network centrality of financial centres and their growth. We distinguish between intra-city and inter-city network connectivity and find that financial centres with a larger number of intercity network ties and assortative intra-city networks grow faster, while intra-city network density does not appear to affect financial centre growth. Our results on inter-city network ties are broadly consistent with established knowledge on cluster networks. In contrast, our findings on financial centres’ intra-city networks contradict previous research, which suggests that dense and disassortative intra-cluster networks aid economic performance of cluster

Critiquing construct validity in world city network research: Moving from office location networks to inter-organisational projects in the modelling of intercity business flows

The interlocking world city network model (IWCNM) and other office location approaches (OLAs) have become the most widely used empirical models of the world city network (WCN). Despite numerous methodological improvements, they continue to rely on Taylor’s (2001) legacy of using data on office locations of firms to indirectly estimate intercity business flows. To advance the dialogue about how to improve on existing empirical models of the WCN, we examine the content, construct and structural validity of OLAs. We examine the link between the theoretical construct of intercity business flows and network projections obtained from office location data and uncover evidence that calls into question the validity of OLAs as empirical models of the WCN. In the spirit of no deconstruction without reconstruction, we then develop an alternative empirical model of the WCN, based on directly observable relational ties among APS firms, which are formed through co-production of complex services. We call this the inter-organisational project approach (IOPA). We argue for IOPA’s construct validity as an empirical model of the WCN and offer empirical evidence for its structural validity. We demonstrate it using a global sample of 161,114 investment bank syndicates in the 2000 – 2015 period

Cultivating China’s FinTech ecosystem: The visible hand of the state

We investigate the role of open system intermediaries (OSIs), including incubators, accelerators and science parks, in the effort of the Chinese state to harness the innovative potential of fintech ventures. We conducted 50 semi-structured interviews and documented how the Chinese state uses OSIs to support strategically important financial services firms in nurturing cohorts of fintech ventures. This consequently gives rise to a tech-for-fin ecosystem, where innovative fintech ventures are moulded into becoming technology providers for financial services incumbents, while those wishing to fundamentally disrupt the established financial order are excluded from the various support mechanisms provided through OSIs