Natalia Besedovsky published an article in Socio-Economic Review (currently as „advance access“ paper). Using the case of Moody’s, a major credit rating agency, her article “Financialization as calculative practice (…)” traces a fundamental paradigm shift in rating practices since the late 1980s. These innovations were driven by new calculative models, new kinds of analysts (so-called ‘quants’), and a profit-oriented organizational culture at Moody’s, all shaped by an increasingly financialized context. By studying credit rating agencies’ historical and current methodological publications and interviewing rating analysts, Natalia shows that the rating innovations of the 1980s and 1990s entail an entirely different set of epistemological assumptions about the calculability and predictability of the future, representing a fundamental paradigm shift in calculating and defining credit risk. In this framework, risk is not a threat that must be minimized, but a neutral variable that can be calculated, managed and used to generate profits. This new culture of credit risk assessment enabled the emergence and exponential growth of structured finance markets, fueling a culture of high-risk investments. The article contributes to the literature on financialization by arguing that financialization occurs both at the level of organizational culture and calculative practices.
Sebastian Botzem, together with Sigrid Quack (University Duisburg-Essen) and Solomon Zori (Rotterdam School of Management), published an article on the adoption of international accounting standards in Africa in the journal Global Policy.
Their article “International Accounting Standards in Africa: Selective Recursivity for the ‘Happy Few?” is part of the current issue´s special section on “Recursivity in Transnational Governance” edited by Olga Malets and Sigrid Quack. The article discusses the lack of participation of African stakeholders in the standard-setting process as well as the conceptual mismatch between the standard-setter’s objectives on the one hand and the socio-economic, cultural and political conditions in many African countries.
Our colleague Marcus Wolf has contributed to the new blog of the German Association of Political Science (DVPW) working group on orders of violence (Gewaltordnungen). His blog post “Die symbolische Gewalt der Schulden” raises the question whether and under which circumstances debt relations can be interpreted as manifestations of symbolic violence. Marcus argues that in a historical perspective, the morality of debt has often led to forms of direct or indirect violence against debtors, for instance in the case of debtor´s prisons. Nowadys, under the regime of debt-driven consumption, the symbolic violence of debt is much more inscribed in a new governmentality of financialization and is expressed in new attributions of responsibilities and in hidden power relations.
Sebastian Möller has written a short report on the spread of so-called LOBO (ledender option – borrower option) loans among British local authorities for SPERI comment, the blog of the Sheffield Political Economy Research Institute (SPERI). In his contribution, “Financializing town halls: Local councils, LOBO loans and the derivatives markets”, Sebastian briefly introduces this new type of market debt that became quite popular among UK city treasurers prior to the crisis. He describes how a complex network of different public and private actors including new intermediaries, such as treasury management advisors and brokers, facilitated the spread of LOBO loans. Contrary to experiences made by many continental local governements, in the British case the derivative character of this new financial instrumentwas much more hidden, since LOBOs constitute a form of embedded derivatives. In his PhD research project, Sebastian explores the financialization of municipal debt management across Europe.
Abstract: Financialization – the increasing relevance of financial markets, financial actors and financial logics – and the related rise of originate-to-distribute-cycles in the mortgage industry have been considered key explanations for the emergence of financial crises. Analyzing a case study in the European real estate industry, we show how actors strategically manage inter-organizational relations and take advantage of rising asset prices, through refinancing on the basis of loan-to-value even before the originate-to-distribute-cycle of the mortgage industry unfolds. Valuation and accounting are core practices of financialized business models that evolve around management fees, which serve as value carriers and bring potential future profits into the present. Auditing also plays a role as it legitimizes these business activities and facilitates jurisdictional arbitrage. We contribute to the accounting literature by explaining how the strategic configuration of a valuation-accounting nexus leads to organizational short-termism and rewards unsustainable business activities in the real estate industry.
Sebastian Möller has written a new blog post for “Manchester Capitalism: A View From The North”. In his contribution “Mapping & Understanding the Networked Character of Finance”, he summarizes the “Networks in Finance Workshop” held last December in Manchester. This workshop was organized by Adam Leaver and Daniel Tischer from the Manchester Business School. On this occasion, scholars from different fields of study have discussed the roles of networks in different areas of finance and the value of network analysis for understanding ongoing processes and dynamics. At this workshop, also Sebastian Botzem presented a paper co-authored by Natalia Besedovsky on the reconfiguration of the global financial elite. The blog post provides a brief overview of the different projects presented in Manchester and sketches out some routes for further research.
Sebastian Möller and Marcus Wolf have written a report on the Young Scholars Workshop on Interdisciplinary Perspectives on Finance for the German social science blog soziopolis. The workshop was organized by our research group in September at the University of Bremen with kind support by the Center for Transnational Studies (ZenTra) and the Foundation of the University of Bremen. In their contribution, Marcus and Sebastian summarize the keynote talks by Eleni Tsingou, Lucia Quaglia, and Phil Mader and discuss strenghts and downsides of the interdisciplinary study of financial market developments. There is also a blog post in English language on socializing finance. Previously, Marcus and Sebastian already have published blog posts on soziopolis on the Debt Trails Workshop in Budapest and the symposium on the occasion of the 20th anniversary of the Institute for Intercultural & International Studies.
Sebastian Botzem and Marcus Wolf have written a comment on the Transatlantic Trade and Investment Partnership (TTIP) that is currently negotiated between the United States and the EU for the IMPULSE blog of Bremen University. In their comment, Sebastian and Marcus argue that TTIP is a potential threat for democracy on both sides of the North Atlantic. In particular, regulatory cooperation, prioritization of investor´s interests, and private investor-to-state dispute settlement bodies could undermine democratic decison-making. Thus, TTIP should be discussed much more as a democracy issue rather than as a technical free trade agreement. The blog entry goes back to a public panel discussion on TTIP organized by the research group earlier this autumn in Bremen.
The European Parliament is currently working on its own initiative report on “The EU role in the framework of international financial, monetary and regulatory institutions and bodies”. In this context, the Economic and Monetary Affairs Committee (ECON) has organized a workshop, which took place on 17th June 2015 in Brussels. The workshop’s aim was to provide ECON Members with information and background on the current situation of EU representation in financial standard setting bodies within selected international entities.
Prof. Sebastian Botzem reported on the International Accounting Standards Board. International Financial Reporting Standards define the rules for corporate accounting and are set by a private standard setter: the International Accounting Standards Board (IASB). The EU has no formal role in developing these standards, but de facto endorses them ex post. This raises questions with regard to the overrepresentation of commercial interests in accounting regulation and the need to debate a stronger role not only for civil society actors but also for public entities such as regulators.