Chapter

The New Financial Markets

Roy C. Smith and Ingo Walter

in Governing the Modern Corporation

Published in print February 2006 | ISBN: 9780195171679
Published online September 2006 | e-ISBN: 9780199783618 | DOI: http://dx.doi.org/10.1093/0195171675.003.0002
 The New Financial Markets

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This chapter examines the fundamental effects related to the evolving dominance of capital markets. By the end of the 20th century, the proportion of all financial assets held by banks had declined to approximately 30% from 45% in 1980, with the difference transferred to global financial markets that had developed to an extraordinary, completely unprecedented size with market capitalization of stocks and bonds exceeding $72 trillion in 2000. These markets contained powerful forces that could quickly move funds in large quantities around the world to jump into (or out of) a suddenly discovered investment opportunity. These forces were energized by enormous turnover volumes — the value of consolidated world stock trading in 2000 was more than $47 trillion, one and a half times its market capitalization. About half of this trading occurred outside the United States, in stock markets in Europe, Asia, and Latin America.

Keywords: global financial markets; capital markets; economic policy; mergers; restructuring; technology; financial services; deregulation

Chapter.  9574 words. 

Subjects: Microeconomics

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