European Capital Markets

164 Pages·2000·3.209 MB·English

by  Werner G. Seifert, Ann-Kristin Achleitner, Frank Mattern, Clara C. Streit, Hans-Joachim Voth (auth.)

European Capital Markets
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European Capital Markets
Werner G. Seifert
Ann-Kristin Achleitner
Frank Mattern
Clara C. Streit
Hans-Joachim Voth
©Werner G. Seifert, Ann-Kristin Achleitner, Frank Mattern,
Clara C. Streit and Hans-Joachim Voth 2000
Softcover reprint of the hardcover 1st edition 2000 978-0-333-92436-5
All rights reserved. No reproduction, copy or transmission of
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or under the terms of any licence permitting limited copying
issued by the Copyright Licensing Agency, 90 Tottenham Court
Road, London W1P9HE.
Any person who does any unauthorised act in relation to this
publication may be liable to criminal prosecution and civil
claims for damages.
Published 2000 by
MACMILLANPRESSLTD
Houndmills, Basingstoke, Hampshire RG21 6XS
and London
Companies and representatives
throughout the world
ISBN 978-1-349-42512-9 ISBN 978-0-230-28706-8 (eBook)
DOI 10.1057/9780230287068
Acatalogue record for this book is available
from the British Library.
This book is printed on paper suitable for recycling and
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Copy-edited and typeset by
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Contents
List of Figures and Tables viii
List of Abbreviations xi
Preface xiii
Executive Summary xv
1 Introduction 1
Disintermediation, Consolidation and Technological Change 3
Structure 6
2 Performance Measures 8
Top Talent 8
Employment 9
Access to Information 10
Produits Sans Patrie 11
Foreign-exchange Trading 12
Cross-border Lending 16
Over-the-counter Derivatives Trading 17
Fixed-income Trading 22
Summary: For a Few Dollars More 23
Infrastructure-driven Products 24
Exchange-traded Derivatives 24
Clearing and Settlement 28
Equity Trading 29
Summary 34
‘Sticky’Products 34
Asset Management 35
Fixed-income Issuance 39
Equity Issuance 42
Mergers and Acquisitions 44
Buyouts 49
Summary 50
Trade in Financial Services 50
The Cost of Regulation 54
The Eye of the Beholder: Businessmen’s Perceptions 56
Summary: Competitive Profiles 57
v
vi European Capital Markets
3 Financial Centres, Capital Market Performance and
the Economy 60
Bringing Home the Bacon 60
Liquidity Measures and the Composition of External Financing 62
Returns for Investors 65
Changes in Financial Wealth 69
International Capital Market Integration 74
Corporate Governance 78
Capital Productivity and Financial Centre Performance 82
Summary 86
4 Competitive Dynamics 87
Interpreting the Evolution of European Financial Centres 87
Criteria of Excellence 87
The Limits of the Checklist Approach 89
ADifferent Twist to the Tale 91
Could Continental Centres Compete? 95
Local Business – High Margins, Moderate to High Volumes,
High Growth 95
International Business – Plain Vanilla 96
International Business – Rising Stars 96
AStrategy for the Second Tier? 97
Summary 97
The Euro and the City – ABurning Non-issue? 98
Expectations before the Launch of EMU 98
The Impact of Emu 99
Policy Implications 101
Summary: Limits to Competition between Financial Centres 102
London’s Last Laugh: ASpeculation 104
5 Policy Recommendations 108
‘Prudent Man’Regulation for Europe 108
Two Approaches to Investment Regulation 108
Realized Returns 109
Necessary Steps 110
High Returns – Junk Bonds, Going Private and a European
Takeover Code 111
Effects of an Active Takeover Market 111
Forces Favouring a European High-yield Market 114
Measures 116
Contents vii
Spin-offs, Carve-outs and Tracking Stocks – a Kick-start for
Continental Economies? 120
Measures and Consequences 121
Taxing Issues and the Road Ahead 123
Tax Competition – Let’s Have Some? 124
ASingle European Capital Market 128
Summary 131
Notes 134
References 141
Index 145
List of Figures and Tables
FIGURES
2.1 Senior investment bankers by location, 1998 9
2.2 Financial institutions by centre, 1998 10
2.3 Bums, banks and brains, 1998 11
2.4 Total net-gross foreign-exchange turnover per year, selected
years 1989–98 12
2.5 Shares in total forex trading, 1992 and 1998 14
2.6 Market share in total forex trade in Europe, 1992 and 1998 14
2.7 Forex trading, research and other functions, 1998 15
2.8 Cross-border lending, 1996–8 16
2.9 OTC derivatives, 1993–8 17
2.10 Global turnover in OTC derivatives, 1995 and 1998 18
2.11 Shares in total OTC derivatives trading, 1992 and 1998 19
2.12 Market share in OTC derivatives trading in Europe,
1995 and 1998 19
2.13 Development of credit derivatives, actual and estimate,
1996–2000 20
2.14 Senior staff in fixed-income trading and sales, 1998 22
2.15 Number of exchange-traded derivatives contracts, 1987–98 24
2.16 Location of international exchange-traded derivatives
turnover, 1995 and 1998 25
2.17 Derivatives exchanges’volumes, 1998–9 26
2.18 Contract volumes, 1998–9 27
2.19 Lorenz curves, stock-exchange trading in Europe,
1990 and 1998 30
2.20 Costs and scale of stock exchanges 30
2.21 Relative cost-efficiency of stock exchanges, 1997 31
2.22 Equity trading volume by country, 1997/8 32
2.23 Distribution of listings and trading volume, NYSE
compared with home country 33
2.24 Assets under institutional management, 1990–8 35
2.25 Financial assets of institutional investors, 1997 36
2.26 Institutional equity holdings, 1994, 1996 and 1998 37
2.27 Equity portfolio managers and equity analysts, 1998 37
2.28 Total global debt, volume outstanding: market split, 1990–8 39
2.29 Eurobond issuance: issuer split, 1994–8 40
viii
List of Figures and Tables ix
2.30 High-yield issuance in Europe, 1994–8 41
2.31 ABS issuance in Germany, UK and France, 1994–8 41
2.32 Number of quoted domestic companies, 1996–8 43
2.33 Equity issuance in Germany, France and the UK, 1993–8 43
2.34 Senior staff in equity research and origination/syndication,
1998 44
2.35 Global M&Atransactions, 1990–8 45
2.36 Size of M&Amarkets, 1990–8 45
2.37 M&A: market size, growth and revenues, 1998, estimate 46
2.38 Market capitalization of top 100 firms, 28 April 1999 47
2.39 Proportion of deals with adviser, 1994–8 48
2.40 Value of buyouts by country, 1997–8 49
2.41 Composition of trade, 1997 51
2.42 Market share of selected countries in world financial
services exports, 1996-7 51
2.43 Exports and imports of financial services, 1997 52
2.44 Direct regulatory costs 55
2.45 Competitiveness survey: financial markets, 1999 57
2.46 Competitive profile: Germany 58
2.47 Competitive profile: France 59
2.48 Competitive profile: UK 59
3.1 Value added per head, US, 1996 61
3.2 Value added per employee in investment banks, 1988–97 61
3.3 Growth of value added relative to total factor input,
UK and US 62
3.4 Value of total external financing, 1997 63
3.5 Stockmarket liquidity, 1996–7 64
3.6 Determinants of turnover ratios, 1996–7 65
3.7 Stockmarket performance and inflation in selected countries,
January 1921–December 1996 66
3.8 Risk and return in selected asset markets, 1990–8 66
3.9 Risk and return in selected asset markets, 1995–8 67
3.10 Risk and return in selected stockmarkets for young,
fast-growing companies 68
3.11 Net real and financial wealth, 1997 69
3.12 Changes in net financial wealth per household, 1992–7 70
3.13 Financial literacy and realized rate of return, 1985–97 73
3.14 Capital flows relative to GDP, 1990–7 75
3.15 Flows of investment, 1997 76
3.16 Market integration in Europe, 1979, 1988 and 1998 76
3.17 Correlation of equity markets, 1980–8 77