The Politics of Equity Finance in Emerging Markets

Abstract

When evaluating emerging stock markets, analysts usually fit them into a model of corporate governance derived from Western industrial experience, one where shares are dispersed and shareholders influence firm management through the price mechanism, or one where shares are held in blocs and banks play a role. This book challenges this approach and the underlying assumptions, which are focused on economies at relatively high levels of development. It argues that the political dimension inherent in developing countries prevents the institutional formation of a price mechanism in corporate governance along Western lines. For these markets, stock is a political as well as an economic instrument that has negotiated the transitions associated with building and dismantling the state sector since the 19th century. The book begins with a historical overview of stock markets in developing countries and the international political circumstances that at times facilitated and at times hampered their growth. By focusing on the multiple possible connections between the ownership of shares of an individual firm and the control of rights attached to them, it details how those who wish to issue stock in emerging markets must comply simultaneously with the changing requirements of external actors and internal political constituencies. It then presents case studies of share issues from Latin America, Asia, Eastern Europe, and Africa, which build from the level of the firm, to the state, to the international system across the same time span. The book concludes with reflections on the role of equity finance in broader processes of privatization, development, and economic globalization.

The Puzzle

“…Scholars have previously drawn attention to the ways in which international organizations like the IMF and World Bank have promulgated international standards and the development of financial markets (Lavelle, 2004;Mosley, 2010Mosley, , 2003bWilf, 2017); highlighted the incentives that markets generate to converge on international standards (Simmons, 2001); revealed the ways in which other states harness the reputational dynamics in global markets to pressure conver gence (Sharman, 2009(Sharman, , 2008; and the ways in which transnational networks generate processes of learning and emulation that drive convergence (Dobbin et al, 2007;Porter, 2005).…”

“…There is a vast, and growing, literature on the politics of financial regulation within and among countries in the core of the global financial system (see for instance Botzem, 2014;Büthe and Mattli, 2011;Haber and Calomiris, 2015;Helleiner, 2014;Kapstein, 1989;Lall, 2012;Lavelle, 2013;Oatley and Nabors, 1998;Perry and Nölke, 2006;Porter, 2005;Quaglia, 2019Quaglia, , 2014Singer, 2007;Tarullo, 2008;Underhill and Zhang, 2008;Young, 2012;Zysman, 1984). Scholarship on the politics of financial regulation in emerging economies and developing countries is equally insightful yet much less extensive and has tended to focus on the largest emerging and developing countries (Chey, 2014;Haggard and Lee, 1995;HamiltonHart, 2002;Hutchcroft, 1998;Knaack, 2017;Lavelle, 2004;Martinez Diaz, 2009;Naqvi, 2019;Walter, 2008). This reflects a tendency among scholars of international political economy, and international relations more broadly, to focus on countries with the largest economies on the grounds that they exert systemic influence over the global economy and the way it is governed (Drezner, 2008).…”

Formal organizing and transnational communities: evidence from global finance governance associations, 1879–2006

“…The formation of central banks indicates infrastructural development because "more day 1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 to day activities came into the orbit of finance via the growth and development of banking systems in many countries" (Lavelle 2004). This infrastructural development owed much to the proliferation of American-style economic models across the globe.…”

Markets and Medical Care: The United States, 1993–2005

“…“Markets” are not a form of organization that can be separated from the context of norms and other institutions. A “stock market,” for example, may be constructed in very different ways and for very different purposes in accordance with how politics, economic resources, and economic organization vary across countries (Lavelle 2004). The literature of political economy shows that the way capital is organized and the resulting corporate incentives and norms can differ across countries (as referenced in Arrow 2001; for more details, see Doremus et al 1999; Shonfield 1965).…”