Rahul Prabhakar | University of Oxford (original) (raw)
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Papers by Rahul Prabhakar
GEG Working Paper 2013/86, Jun 2013
What explains the form and substance of international financial standards? I propose a novel theo... more What explains the form and substance of international financial standards? I propose a novel theory and present original evidence to test two central claims. First, the structure of domestic institutions and strategic interaction within a state incentivizes an actor from that state to prefer and pursue a certain form of international standard: legally or non-legally binding. Second, the type of decision-making rule used in international bargaining—not the market power or other characteristics of key players—explains the substance of the final standard. More restrictive decision-making rules, which use majority or supermajority voting, lead to greater change than open rules, which are based on consensus or unanimity voting.
Domestic and international institutional settings provide enduring opportunities and constraints for key players in global finance. Supported by domestic collaboration between regulators and industry, French officials set a legally binding and deep de facto international standard for hedge fund managers over the vigorous objections of the City of London. The lack of international insurance regulation is due not to the lack of effort by the UK Financial Services Authority and its European partners, but to open decision-making rules that allow US state regulators, albeit fragmented and under-resourced, to protect the international status quo.
Financial regulatory reform remains high on global and national political agendas. Some proposals... more Financial regulatory reform remains high on global and national political agendas. Some proposals call for the consolidation of regulatory structures by merging or eliminating existing regulatory agencies. Financial supervisory consolidation has occurred in a number of developed countries over the past two and a half decades. This paper seeks to explain why a substantial number of developed countries have opted to reform their financial regulatory structures from a sector-based to a consolidated model. Based on an ordered logit regression analysis of a newly created cross-national financial dataset, this paper argues against the prevailing literature in globalization that has discounted the influence of multinational firms on domestic politics. It moreover disputes the assumptions of realist-based and policy diffusion perspectives that prioritize hegemonic market power. This paper demonstrates how the internationalization of finance, through the spread of global financial services firms (“conglomerates”), has driven supervisory consolidation in developed countries. These global firms prefer reduced compliance costs through the elimination of duplicative regulation. Motivated by competitiveness concerns, politicians and regulators in highly internationalized countries are pressured to consolidate financial supervision, lest they cause global firms to move elsewhere because of unfavorably duplicative regulation. A consolidated supervisor offers lower compliance costs compared to a system of sector-based supervisors by eliminating duplicative regulation. In sum, the higher the level of financial internationalization in a country, the greater the level of supervisory consolidation.
GEG Working Paper 2013/86, Jun 2013
What explains the form and substance of international financial standards? I propose a novel theo... more What explains the form and substance of international financial standards? I propose a novel theory and present original evidence to test two central claims. First, the structure of domestic institutions and strategic interaction within a state incentivizes an actor from that state to prefer and pursue a certain form of international standard: legally or non-legally binding. Second, the type of decision-making rule used in international bargaining—not the market power or other characteristics of key players—explains the substance of the final standard. More restrictive decision-making rules, which use majority or supermajority voting, lead to greater change than open rules, which are based on consensus or unanimity voting.
Domestic and international institutional settings provide enduring opportunities and constraints for key players in global finance. Supported by domestic collaboration between regulators and industry, French officials set a legally binding and deep de facto international standard for hedge fund managers over the vigorous objections of the City of London. The lack of international insurance regulation is due not to the lack of effort by the UK Financial Services Authority and its European partners, but to open decision-making rules that allow US state regulators, albeit fragmented and under-resourced, to protect the international status quo.
Financial regulatory reform remains high on global and national political agendas. Some proposals... more Financial regulatory reform remains high on global and national political agendas. Some proposals call for the consolidation of regulatory structures by merging or eliminating existing regulatory agencies. Financial supervisory consolidation has occurred in a number of developed countries over the past two and a half decades. This paper seeks to explain why a substantial number of developed countries have opted to reform their financial regulatory structures from a sector-based to a consolidated model. Based on an ordered logit regression analysis of a newly created cross-national financial dataset, this paper argues against the prevailing literature in globalization that has discounted the influence of multinational firms on domestic politics. It moreover disputes the assumptions of realist-based and policy diffusion perspectives that prioritize hegemonic market power. This paper demonstrates how the internationalization of finance, through the spread of global financial services firms (“conglomerates”), has driven supervisory consolidation in developed countries. These global firms prefer reduced compliance costs through the elimination of duplicative regulation. Motivated by competitiveness concerns, politicians and regulators in highly internationalized countries are pressured to consolidate financial supervision, lest they cause global firms to move elsewhere because of unfavorably duplicative regulation. A consolidated supervisor offers lower compliance costs compared to a system of sector-based supervisors by eliminating duplicative regulation. In sum, the higher the level of financial internationalization in a country, the greater the level of supervisory consolidation.