Proposal preview

Financial centers, agents and transactions on the long run. Towards a multidimensional approach and tools of analysis

This panel aims at investigating the topological, organizational and sociological dimensions of the banking and stock-exchange industry. It promotes a multidimensional approach to the study of financial centers and the use of innovative digital tools for data collection and analysis, in order to empirically investigate the centers’ organization, the transactions among financial intermediaries and their networks.
The stock exchange is the main site of encounter and interaction between private individuals, businessmen, legal intermediaries, and interlopers. Developments in telecommunication and information technology since the 1980s led some to believe in the end of geography for trading activities. But actually, technological progress has not changed their location as much as one might expect with. On the contrary, these activities remain concentrated in a handful of “global cities” (Sassen 2001) that compete intensely with one another. These cities concentrate most of financial institutions and attract specialized workforces. Physical concentration favors exchanges of information. The manner of exchanging information conditions its short-term value and profitable usages. For this reason, historical spatial analyses of financial centers add new insights on the organization of financial transactions.
The second dimension of the stock exchange its indeed its organization arrangement and structure. Prices formation enabling transactions is the product of two confrontations. First, the confrontation between the buyers and sellers, each looking to strike a bargain. Second, a confrontation over the terms of exchange. Each individual or institutional trader wants its interest to prevail over of its counterparty’s one. If organizations shaping the unfolding of this trade vary according to countries and time period, they all crystallize in formal and informal rules and the power relations among the unequal parties participate in the exchanges. The distribution of profits generated by the operations of the stock exchange and the intermediation constitutes the stake of these power struggles (Pirrong 2000).
This leads to the third dimension of the financial centers. The stock exchange is eventually a social space traversed by the double struggle over exchange and the terms of exchange. The confrontation between discordant interests depends greatly on their intermediation. To maintain their positions, intermediaries invest in individual and collective strategies (Preda 2009) inscribed within the relations of power. Indeed, a financial center includes institutions and agents, both public and private, united in rivalry against other centers (Lagneau-Ymonet & Riva 2012), but at the same time competitors in their professional practices (Hautcoeur & Riva 2012). In order to understand and analysis these practices, therefore, financial actors must be investigated in the broader perspective of their socio-professional environment, as well as in the social networks they mobilize through and beyond the financial operations (Padgett and Powell, 2012; Verley 2010).
Research questions
– What kinds of organizations and practices are employed by financial operators to pursue transactions?
– How social networks shape the action of financial intermediaries?
– What are the correspondences between the topological and social spaces of a financial center?
The organizers are interested in gathering contributions about the multiple dimensions of financial centers. Original empirical analysis that apply innovative quantitative and qualitative methods of data collection and treatment are particularly welcome. Among them: OCR of archival material, networks visualization and measure, geo-historical analysis based on SIG tools.
Proposals are accepted until January 28th 2018

The following scholars have already committed to participate to the panel:
• Veronica Aoki Santarosa (University of Michigan): “Financial Intermediation Before Modern Deposit Banks: Evidence from a Brokerage Law Reform in Eighteenth-Century Marseille”
• Maria Stella Chiaruttini (European University Institute):
“’Bankers of Italy, Italy has woken’: Banking elites and the new map of Italian financial centres in the age of the Risorgimento (1814-1874).”
• Jérémy Ducros (University of Genève & Paris School of Economics):
“Information technology and the French stock exchanges, 19th and early 20th centuries”.
• Elisa Grandi and Raphael Hekimian (Paris School of Economics):
“Banks and networks at the Belle Époque, Interlocking directorates and banking performance in France 1882-1914”.
• Paul Lagneau-Ymonet (Paris-Dauphine, PSL Research University, IRISSO):
“How to identify, locate and map financial intermediation in late nineteenth-century Paris? Preliminary results from the BELLEPOQUE project”.
Discussants:
• Paul Lagneau-Ymonet (Paris-Dauphine, PSL Research University, IRISSO)
• Elisa Grandi (Paris School of Economics)

Bibliography:
• Hautcoeur, P.-C. & Riva, A. 2012. “The Paris financial market in the nineteenth century: complementarities and competition in microstructures”. Economic History Review. 65 (4): 1326-1353.
• Lagneau-Ymonet, P. & Riva A. 2012. Histoire de la bourse Paris: La Découverte.
• Padgett, J. & Powell, W. 2012. The Emergence of Organizations and Markets. Princeton: Princeton University
• Pirrong, C. 2000. “A Theory of Financial Exchange Organization.” Journal of Law and Economics. 43 (2): 437-471.
• Preda, A. 2009. Framing finance: The boundaries of markets and modern capitalism. Chicago: University of Chicago Press.
• Sassen, S. 2001. The Global City. Princeton NJ: Princeton University Press.
• Verley, P. 2010. “Organizations of National Financial Markets and Convergence of Practices: Institutions and Networks of Parisian Brokers in Nineteenth-Century Parisian Financial Markets.” In Baubeau P. & A. Ogren (eds.), Convergence and Divergence of National Financial Systems. Evidence from the Gold Standards, 1871-1971. London: Pickering & Chatto.

Organizer(s)

  • Elisa Grandi Paris School of Economics elisa.grandi@psemail.eu Italy
  • Paul Lagneau-Ymonet Paris-Dauphine, PSL Research University, IRISSO paul.lagneau-ymonet@dauphine.fr France

Session members

  • Maria Stella Chiaruttini, European University Institute
  • Katerina Bregianni, Academy of Athens
  • Johanna Gautier, Graduate Institute of international and development studies
  • Pierre-Cyrille Hautcoeur, Ecole des Hautes Etudes en Sciences Sociales - Paris School of Economics
  • Giovanni Farese, Università Europea di Roma
  • Ekaterina Kulenkova, Moscow Lomonosov State University
  • Angelo Riva, European Business School - Paris School of Economics
  • Sofya Salomatina, Moscow Lomonosov State University
  • Elisa Grandi, Paris School of Economics

Discussant(s)

  • Elisa Grandi Paris School of Economics elisa.grandi@psemail.eu
  • Maria Stella Chiaruttini European University Institute maria.chiaruttini@eui.eu
  • Johanna Gautier Graduate Institute of international and development studies johanna.gautier@graduateinstitute.ch
  • Giovanni Farese Università Europea di Roma Giovanni.Farese@unier.it
  • Ekaterina Kulenkova Moscow Lomonosov State University kate_kulenkova84@mail.ru
  • Mariusz Lukasiewicz University of Leipzig mariusz.lukasiewicz@uni-leipzig.de

Papers

Panel abstract

The panel investigates the topological, organizational and sociological dimension of the banking and stock-exchange industry. It promotes a multidimensional approach to the study of financial centers and the use of digital tools for data collection and analysis, in order to investigate the centers’ organization, the financial intermediaries and their networks. Three dimensions are discussed: 1) the stock exchange as main site of encounter and interaction between individuals. Despite technological progresses, finacial centers' location did not change that much and historical spatial analyses of financial centers add new insights on the organization of financial transactions. 2) The financial centers’ organization arrangement and structure. Prices formation enabling transactions is the product of the confrontation between the buyers and sellers and the confrontation over the terms of exchange. 3) The financial centers’ as social spaces in which the confrontation among discordant interests depends greatly on their intermediation.

1st half

’Bankers of Italy, Italy has woken’: Banking elites and the new map of Italian financial centres in the age of the Risorgimento (1814-1874)

Maria Stella Chiaruttini

In the mid-nineteenth century Italy was still trailing behind in terms of financial development. Italian markets were fragmented not only along political but also regional borders within each state. From the Restoration until the 1870s, the creation and dismantlement of political units – or sometimes just the attempts thereat – redrew the map of Italian financial centres several times. Crucial to their fall or ascent were both the competitive (dis)advantages in terms of market structures inherited from their previous history and the relationship of their financial elites with political power. The rise of Genoa, Turin and later Milan, as well as the decline of Naples, were not merely due to geo-economic factors but to national unification and the ability of local elites to mediate, compromise and assert their interests at economic and political level. From the very beginning, financial policies thus became deeply politicised. While in the North they cemented...

In the mid-nineteenth century Italy was still trailing behind in terms of financial development. Italian markets were fragmented not only along political but also regional borders within each state. From the Restoration until the 1870s, the creation and dismantlement of political units – or sometimes just the attempts thereat – redrew the map of Italian financial centres several times. Crucial to their fall or ascent were both the competitive (dis)advantages in terms of market structures inherited from their previous history and the relationship of their financial elites with political power. The rise of Genoa, Turin and later Milan, as well as the decline of Naples, were not merely due to geo-economic factors but to national unification and the ability of local elites to mediate, compromise and assert their interests at economic and political level. From the very beginning, financial policies thus became deeply politicised. While in the North they cemented pre-existing ties, in the South they proved highly divisive, despite the financial revolution that swept the whole country alike after Unification.

Financial centers and national markets in the autobiography of the Greek banker Andreas Sygros: transformations of the market during the Belle époque and beyond

Katerina Bregianni

The aim of the paper is to explore a particular Greek literature source, the autobiography of A. Syngros. Sygros was a Greek banker in Istanbul between 1845 and 1871, while he was afterwards based in Athens. The source describes the global capitalistic mechanisms of the 19th century and the intermediary role of the Greek entrepreneurial elite in it. Syngros entrepreneurial role went through major turning points. In the first place, transition from being a merchant and banker of the Sultan to international entrepreneur; later, involvement in Greece’s finances and relations with State’s international creditors especially during the Greek default of 1893 and again unofficially participating in the negotiations with Greece’s creditors in 1897. This geographical shift from the ‘’globalised’’ Ottoman Empire to the Greek State which was undergoing a process of national homogenisation, reflects in fact a collective phenomenon characterising the Greek Diaspora elite in general. As the ottoman part...

The aim of the paper is to explore a particular Greek literature source, the autobiography of A. Syngros. Sygros was a Greek banker in Istanbul between 1845 and 1871, while he was afterwards based in Athens. The source describes the global capitalistic mechanisms of the 19th century and the intermediary role of the Greek entrepreneurial elite in it. Syngros entrepreneurial role went through major turning points. In the first place, transition from being a merchant and banker of the Sultan to international entrepreneur; later, involvement in Greece’s finances and relations with State’s international creditors especially during the Greek default of 1893 and again unofficially participating in the negotiations with Greece’s creditors in 1897. This geographical shift from the ‘’globalised’’ Ottoman Empire to the Greek State which was undergoing a process of national homogenisation, reflects in fact a collective phenomenon characterising the Greek Diaspora elite in general. As the ottoman part of his activities was already explored in previous personal research, this paper will focus on the second and third volumes of his autobiography, covering the period from the early 1860s to the end of 19th century. Syngros describes his personal entrepreneurial strategy vis-à-vis the financial globalisation process. According to the Greek banker, at the beginning of the 1860’s import and export oriental trade’s shrinking was due to the application of sophisticated commercial methods by the West - especially by English trade - and to the opening of new commercial ports for international trade activities. Naturally, the globalization processes of transnational commerce could not be associated only with the generalization of transport or rising competitiveness in the market, but had to do with the conditions of free trade in Europe prevailing precisely since the beginning of the 1860’s, with the capital market expansion and the stabilization of effective monetary standards.

Competing with the Bourse. Stock Exchange Industry Regulation, 1893-1898

Angelo Riva, Pierre-Cyrille Hautcoeur

We study the causes and the consequences of regulatory changes affecting the competition between the transparent Bourse and the OTC-like Coulisse in the Paris financial center at the turn of the 20th century. First, we provide evidences supporting the interest group theory to explain regulatory changes. By using these changes as natural experiments, we show then that competition widens bid-ask spreads while monopoly makes them narrower. These results are in line with a recent literature questioning the effects of “dark” competition: a transparent monopoly could be more effective than competition at least if the latter involves opaque markets.

We study the causes and the consequences of regulatory changes affecting the competition between the transparent Bourse and the OTC-like Coulisse in the Paris financial center at the turn of the 20th century. First, we provide evidences supporting the interest group theory to explain regulatory changes. By using these changes as natural experiments, we show then that competition widens bid-ask spreads while monopoly makes them narrower. These results are in line with a recent literature questioning the effects of “dark” competition: a transparent monopoly could be more effective than competition at least if the latter involves opaque markets.

Moscow stock market of the 1910s at the micro level: agents, transactions, informal practices

Ekaterina Kulenkova, Sofya Salomatina

This presentation explores the Russian financial market of the 1910s at the micro level. Surprising insights were revealed through the credit accounts of clients of the Ryabushinsky Bank, one of the Moscow joint-stock commercial banks. Our database comprises 419 customers, their 560 credit accounts of 1910 and 1912, as well as 13,413 securities transactions recorded in these accounts. These records reveal that in addition to stockbrokers there were unofficial professional exchange brokers trading for themselves and for customers, often, but not always, using bank loans. In their accounts we can see how they were making a huge turnover of speculative stock trading that was very short-term, within 1-2 days, buying and selling shares (blue chips) only, creating profits from the high turnover. The security prices and trade turnover can be traced daily, and it is clear that such intermediaries set the tone for the Moscow market. Banks were also active...

This presentation explores the Russian financial market of the 1910s at the micro level. Surprising insights were revealed through the credit accounts of clients of the Ryabushinsky Bank, one of the Moscow joint-stock commercial banks. Our database comprises 419 customers, their 560 credit accounts of 1910 and 1912, as well as 13,413 securities transactions recorded in these accounts. These records reveal that in addition to stockbrokers there were unofficial professional exchange brokers trading for themselves and for customers, often, but not always, using bank loans. In their accounts we can see how they were making a huge turnover of speculative stock trading that was very short-term, within 1-2 days, buying and selling shares (blue chips) only, creating profits from the high turnover. The security prices and trade turnover can be traced daily, and it is clear that such intermediaries set the tone for the Moscow market. Banks were also active participants in the stock market; they not only provided credit to the securities trade and traded on behalf of clients, but also traded on their own account through figureheads or frontmen, and such cases were also revealed in our archival data. At the same time, the bank dealt in new issues of securities of companies affiliated with the bank and the bank distributed these securities among its customers at preferential prices. In addition to banks and professional intermediaries, the credit accounts of Ryabushinsky Bank’s clients show how large firms bought reserves in the form of bonds, and well-to-do Moscow réntiers managed their portfolios of securities, mainly bonds. The bank had many small customers, concerned with both investment and speculation. The Moscow market was the second in the Russian Empire after St. Petersburg, and these markets operated as a single market in fact in the 1910s, which is also proved by the sources. As a result, the article shows that the financial market at the micro level was essentially a more complex system and hierarchy than was originally conceived from traditional sources of securities market research.

Italy's Mediobanca. Merchant Banking, International Development and Transatlantic Financial Networks in the Bretton Woods Era

Giovanni Farese

This paper will seek to explore the geoeconomic, geopolitical and sociological features of Mediobanca’s internationalization process in the postwar years. Mediobanca is a Milan-based merchant bank founded in 1946 under the leadership of Italian banker Enrico Cuccia (1907-2000). Though the bank’s role in Italy’s development has been long debated, little is known about its global outreach in the context of the Bretton Woods System, the Cold War, and decolonization. This paper will address this topic from various viewpoints. First, it will focus on the internationalization of Mediobanca’s capital base with partners such as Lazard and Lehman Brothers. Second, it will explore Enrico Cuccia’s personal network, including members of the New York-and-Paris high-banking circles, such as Jean Guyot and André Meyer. Third, it will look at broader geoeconomic and geopolitical structural transformations pulling Mediobanca in faraway places such as Africa and Asia. What emerges is a web of capital, people and...

This paper will seek to explore the geoeconomic, geopolitical and sociological features of Mediobanca’s internationalization process in the postwar years. Mediobanca is a Milan-based merchant bank founded in 1946 under the leadership of Italian banker Enrico Cuccia (1907-2000). Though the bank’s role in Italy’s development has been long debated, little is known about its global outreach in the context of the Bretton Woods System, the Cold War, and decolonization. This paper will address this topic from various viewpoints. First, it will focus on the internationalization of Mediobanca’s capital base with partners such as Lazard and Lehman Brothers. Second, it will explore Enrico Cuccia’s personal network, including members of the New York-and-Paris high-banking circles, such as Jean Guyot and André Meyer. Third, it will look at broader geoeconomic and geopolitical structural transformations pulling Mediobanca in faraway places such as Africa and Asia. What emerges is a web of capital, people and international relations in an era of financial globalization. This paper will use new sources culled out from the historical archive of Mediobanca.

Black Monday and the Sense of Risk: The Crash of October 1987 in the London Stock Exchange

Johanna Gautier

I will explore in this paper how the London Stock Exchange (LSE), in relation to foreign stock markets, reacted to the 1987 crisis. On the one hand, this crisis had not been anticipated. Neither LSE organizations nor the U.K. government were prepared to face such an upheaval. On the other hand, the effects of the crash were rapidly contained, even though the administration was caught by surprise. Over the next decade, interest rates went down again, and business went on as usual. I will thus analyze how financial markets adjusted to the new setting. What was the international reaction? Did this crisis foster new methods of international cooperation to manage interconnected financial markets? What were the geographic applications, or the origins of the actors involved? I will study these questions thanks to archival documents from the London Stock Exchange’s archives, or the U.K. national archives, and compare the British situation...

I will explore in this paper how the London Stock Exchange (LSE), in relation to foreign stock markets, reacted to the 1987 crisis. On the one hand, this crisis had not been anticipated. Neither LSE organizations nor the U.K. government were prepared to face such an upheaval. On the other hand, the effects of the crash were rapidly contained, even though the administration was caught by surprise. Over the next decade, interest rates went down again, and business went on as usual. I will thus analyze how financial markets adjusted to the new setting. What was the international reaction? Did this crisis foster new methods of international cooperation to manage interconnected financial markets? What were the geographic applications, or the origins of the actors involved? I will study these questions thanks to archival documents from the London Stock Exchange’s archives, or the U.K. national archives, and compare the British situation with American and French stock exchanges, through the documents of the Compagnie des agents de change in France, national archives, Federal Reserve’s documents, and Treasury archives. Sources will be completed by several interviews I led with actors of the time, like David de Rothschild.

2nd half