Capital markets finance domestic infrastructure projects and national enterprises. They include stock and bond markets that channel wealth from savers and investors to borrowers, such as large corporations and governments. Capital markets also move financing across national borders, as when investors buy bonds originated outside their countries of origin. But domestic capital markets are not evenly developed across different market contexts. Various factors impact the development of these markets in any one context, such as the generation of large pools of capital, the relative ease of currency convertibility, and standardized methods for rating credit and risk. The research supported by this award will advance our understanding of these factors as either facilitating or impeding the development of capital markets in specific contexts. This is significant, since reductions in aid and multilateral funding have led to a rise in new forms of debt-financing. By analyzing the development of debt instruments and their mobilization across borders, the research will provide insights for policy debates regarding the aims of financial regulation.
This study hypothesizes that the successful development of new capital markets depends on: 1) the generation of large pools of capital in local currencies and ease of currency convertibility; 2) the production of standardized data sets for credit-scoring, risk-pricing, and asset-class creation; and 3) the role of regulatory policy. This hypothesis contrasts with approaches to global finance that assume the frictionless movement of finance capital. Instead, the research provides an empirical account of how financialization happens in new markets so as to document the ways it is both achieved and constrained. The field sites for this study represent a soft-currency context in which hypotheses about the development of cross-border financial markets can be readily tested. The hypothesis will be tested through a multi-sited ethnography of constituent building blocks: banks and fintech platforms that collect the local currency deposits of savers; institutional investors that mobilize deposits into financial markets; and the exchanges on which financial instruments are traded. The research results will provide a detailed account of these emergent capital markets by examining the extent to which they generate investment-grade financial products that motivate investment.
This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.
