Global finance is interconnected – but events such as the 2008 crisis in credit derivatives, the algorithmic trading ‘flash crash’, and the LIBOR fixing scandal show the frailties that such close working networks engender and expose.
This was the starting point for a major conference hosted by Alliance MBS academics earlier this month. The event in Manchester brought together both renowned and emerging scholars from different disciplines interested in network structures and dynamics in global finance. Participants from the UK, France, Denmark, the Netherlands and Germany were among those presenting.
Professor Adam Leaver from Alliance MBS said the presentations shared the assumption that a focus on networks of relationships can help us understand both ongoing structural transformations like financialisation and the restabilsation of finance, and its guiding logics after the last financial crisis. “We can only really understand the practices and outcomes of finance if we know precisely how it is put together.”
Social Network Analysis (SNA) enables the mapping of relations among different actors involved in particular financial markets and thereby generates a variety of new insights and questions.
However Prof Leaver added: “SNA is not an explanatory tool in and of itself. Relationships and network reconfigurations need to be theorised and this can be done in very different ways. The workshop produced a diversity of views in this regard, which provide a promising starting point for further collaboration among the researchers.”
While the study of networks is not new, its analysis has become much more popular, formalized, and sophisticated in recent years.
Added Prof Leaver: “The workshop showed that the application of network research to the study of finance can produce new and valuable insights about the structure of finance. But it has to be combined with a critical analysis of power dynamics, expertise, and the social and political context of those relations to better understand the processes at work within the sector.
“In so doing the research presented in Manchester illuminated the local and global interconnectedness of financial services. The challenge now is to update our theories to better understand the risks that emerge within that sector.”
The event, which was co-organised by Prof Leaver and Dr Daniel Tischer, is now being used as the catalyst for further work on financial networks among the participants.