Principal Investigator: Colin Mayer
Colin Mayer is Peter Moores Professor of Management Studies at Said Business School, University of Oxford. He is an expert on corporate finance, governance and taxation, as well as the regulation of financial institution and the role of the corporation in contemporary society. Colin’s current work explores the regulation of financial markets and institutions, international comparisons of financial systems and corporate governance, and their effects on the financing and control of corporations.
Co-Investigators: Philip McCann (Chair in Urban and Regional Economics, Sheffield University Management School)
This project is examining how locally based financial institutions can contribute to the development of local and regional economies and thereby help to address the regional disparities that exist within and across countries. It is in particular interested in how a focus on local and regional based activities can be promoted in the context of national and multinational organizations, thereby combining the benefits of multinational organizations with those associated with local operations.
The importance of this stems from the relationships of trust that can be created at a local level but are hard to sustain at national and international levels.
For example, traditionally local stock markets flourished in individual urban centres around the world. These allowed companies to raise risk-based sources of finance from investors in their local communities. Likewise, local banking has been and remains a particularly important source of finance for small and medium sized enterprises.
However, local financial institutions have limited capital raising capabilities and are exposed to the risks of performance of their local economies. So local financial institutions are often subject to failure during economic downturns when the performance of companies in their localities deteriorate. This has encouraged a consolidation of financial institutions, for example banks, in institutions that are situated in principal urban centres, at the expense of local relations of trust.
The study will seek to learn lessons from those cases of financial institutions around the world that have been able to retain national and international operations at the same time as establishing strong local relationships. These require devolution of decision taking in multinational organizations to the level of local branches through supportive corporate cultures and values, and relations of trust between global headquarters and local operations.
The project explores several different ways in which this has in practice been achieved in particular in Germany, Scandinavia and the US. It will examine the operation of specific organizations and the form in which the combination of capital raising, risk-sharing and local relations of trust have been created and sustained. It will look at how public policy has encouraged the retention of local organizations through regulatory organizations, such as the Federal Deposit Insurance Corporation in the US, and risk sharing arrangements across the savings bank system in Germany.
The project will draw on expertise in economics, finance, geography, philosophy and sociology to provide profound insights into how regional disparities can be diminished through organizational innovations in the financial sector. It will shed new light on the ability of organizations to transcend national differences in culture through values and principles that are sustained consistently at international levels and how the traditional focus of financial policy may have come at the expense of regional disparities in economic growth and prosperity.