Transparency and fairness in the European capital market, vol 217

Hans-Joachim Voth

in Study / edition der Hans-Böckler-Stiftung from Hans-Böckler-Stiftung, Düsseldorf

Abstract: Will the finance markets experience a crash when some of the big hedge funds go bust? And will we soon be seeing large numbers of German businesses taken over by private investors who then dismiss droves of employees and relocate production abroad so that expectations of enormously high yields can be fulfilled? It is these questions that the report investigates. It describes the background and incentives that have led to a vast inflow of money into private equity and hedge funds, explains just how good their performance as an investment vehicle really is, and analyses the opportunities and risks for the stability of the finance system and the growth implications for the German economy. The focus is on regulatory proposals and in this context the report advocates a departure from 'soapbox speeches'. There are an enormous number of practical hurdles standing in the way of tighter regulation and they may not be naively ignored. A direct regulation of funds with domiciles on offshore islands is not enforceable. But even without support from the Anglo Saxon partners, European policy makers can do much to implement more meaningful regulations. An important starting point is the regulation of the banks: the granting of loans must be handled more wisely and with more restraint. The report makes a number of practical proposals, suggesting ways how the many increasingly threatening dangers can be eliminated.

Date: 2008
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