Offshore Financial Centres Research Articles

The effects of cross‐border acquisitions on firms' productivity in the EU

AbstractThis study empirically investigates the extent to which firms in the European Union, once acquired through a cross‐border acquisition, show different productivity levels as compared to those firms that have not been acquired. Our identification strategy relies on the combination of Propensity Scores and the Staggered Difference‐in‐Difference estimator, using firms' balance sheet data for the years 2008–2018. We find that cross‐border acquisitions decrease the productivity of the acquired firms, especially in the manufacturing sector, both high‐ and low‐tech. We also find evidence of origin and sector heterogeneity. Firms targeted by acquirers with ultimate owners originating in emerging market economies and Offshore Financial Centres also decrease productivity of target firms operating in high‐tech manufacturing sectors.

Stuck in 2012: The hesitant geographies of European financial integration since the Eurozone crisis

At the heart of the Eurozone crisis was a dramatic divergence in interest rates between member states and a reversal of previously booming cross-border credit expansion from ‘core’ to ‘periphery’ by European banks. The resulting crisis and retreat behind national borders across the Eurozone challenged European elites’ decade-long project of producing European scale as a space for financial accumulation. The Eurozone crisis has been well-described but post-crisis geographies of financial integration have received limited attention. We chart the financial positionality of member states and the relations between them in the period 2012–2019 using a variety of metrics including intra-Eurozone cross-border bank lending. The post-crisis period is dominated by the European Central Bank’s determination to do ‘whatever it takes’ to save the Euro and its financial system. The resulting asset purchases give it a qualitatively different place in the Eurozone financial system and end the crisis period’s retreat behind national borders. But they do not restore pre-crisis dynamics, and, in addition, unevenness along national lines remains. The crisis era core and peripheral labels still hold but the data also reveal important nuances: not least that the distribution of giant banks matters and offshore financial centres cut across core/periphery boundaries. Yet, even as there is no return to booming core-to-periphery credit, German lending into the Eurozone and its counterpart, Italian borrowing, symbolizes the continuing fragility of the Eurozone banking system. European Central Bank efforts ended the crisis, but more than asset purchases will be required if we are not to remain stuck in 2012.

Latin American Banks and Euromarkets: A View on the Process of Early Bank Globalization from the Periphery

Abstract Global banks and interconnected national banking sectors have been a main characteristic of the modern international financial systems over the last half century. After a sluggish wake up in the early postwar years, international banking took off in the 1970s as the Euromarkets gained traction and strongly developed in the lead up to the international debt crisis of 1982. This article examines the birth of bank globalization in Latin America, a region of the developing world at the centre of global finance and Euromarket developments during this period. It shows that, like their counterparts in industrial countries, leading banking institutions from the region also went international, expanding their presence overseas and their participation in the Euromarkets. The world leading financial centres of London and New York were the main destinations, but they also settled in offshore centres in the Caribbean and other US financial districts from where they conducted international business on their own or in collaboration with other banks. The presence in Germany along with the joint business between Latin American and German banks in the Euromarkets are explored as well. While assessing the extent and scope of early Latin American bank globalization for the first time, the article also provides insights on the evolution and changing nature of this process over the following period.

What is real and what is not in the global FDI network?

Macro statistics on foreign direct investment (FDI) are blurred by offshore financial centers with enormous inward and outward investment positions. This paper uses new data sources, both macro and micro, to estimate the global FDI network while disentangling real investment and phantom investment and allocating real investment to ultimate investor economies. We find that Phantom FDI into corporate shells with no substance and no real links to the local economy accounts for around 40 percent of global FDI. Ignoring Phantom FDI and allocating Real FDI to ultimate investors increases the explanatory power of standard gravity variables by around 25 percent.

Secondary effects of financial sanctions: Bank compliance and economic isolation of non-target states

As states employ financial sanctions as a form of economic coercion, firms become the foot soldiers. This analysis bridges work on weaponized interdependence with work on extraterritorial authority to understand the de-risking behavior of these firms. Companies fearing extraterritorial enforcement are likely to limit exposure to third party jurisdictions, which may expose the firm to the sanctions regime. In particular, we identify two mechanisms – target leakage and political cascades – to understand which third-party jurisdictions are most likely to be affected. We test our hypotheses through analyses of multinational banks’ lending before and after the 2010 sanctions on Iran. Using a difference-in-differences estimator to evaluate the sanction’s impact on cross-border lending, our analysis shows that the sanction reduced multinational banks’ lending to neighboring countries of Iran and its politically aligned states by approximately 14% and 12% respectively. Moreover, we observed lender heterogeneity as banks from offshore financial centers increased their lending to the affected jurisdictions by 32% and 33%. Our findings demonstrate the broader consequences of financial sanctions in terms of the impacted countries and the potential to drive lending to less regulated spaces.

ROLE OF TAX HAVENS (MAURITIUS ETC) IN GLOBAL ECONOMY WITH SPECIAL REFERENCE TO FDI INFLOW IN INDIA

Tax havens, exemplified by jurisdictions like Mauritius, have played a pivotal role in the global economy, particularly concerning Overseas Capital Flows (FDI) inflows into India. These offshore financial centers offer tax advantages and financial confidentiality, attracting multinational corporations and investors alike. Mauritius, through its Double Taxation Avoidance Agreement (DTAA) with India, has become a prominent conduit for FDI into the country. This abstract provides a concise overview of the multifaceted role of tax havens in the global economy and their impact on FDI inflows in India. It touches upon how tax havens facilitate investment, round-tripping, and wealth management, while also highlighting concerns about tax avoidance and the evolving international efforts to address these issues. The future role of tax havens is shaped by ongoing reforms and global tax standards, making them a subject of continuous significance in the world of finance and investment.

Organized crime in the field of illegal trafficking of narcotic drugs, psychotropic substances or their analogues as an object of criminological research

The article describes organized crime in the field of illegal trafficking of narcotic drugs, psychotropic substances or their analogues as an object of criminological research. It was established that organized crime in the sphere of illegal trafficking of narcotic drugs, psychotropic substances or their analogues in Ukraine is characterized by a hierarchy, a strictly and clearly organized, planned system of interconnected criminal activity of individuals, groups, syndicates, cartels, which is carried out with the division of functions, which gives reasons to consider it as a drug business, which is connected with the cultivation, production and trade of drugs for profit and constitutes the economic basis of the existence of organized crime. The main features of criminal offenses committed by organized groups and criminal organizations in the sphere of illegal circulation of narcotic drugs, psychotropic substances or their analogues in Ukraine are: latency of drug business; combination of criminal offenses provided for in Ch. XIII of the Criminal Code of Ukraine with economic criminal offenses, in particular legalization (laundering) of proceeds from illegal drug trafficking with the help of established financial intermediaries and offshore jurisdictions; high level of organization of criminal formations; persistent focus on creating corrupt connections in state authorities and law enforcement agencies; transnationality; the presence of an established source for the purchase of narcotics.It has been established that the drug business consists of several interrelated stages: production, purchase or theft of drugs; delivering them to the place of sale; sale of these products by the consumer. The peculiarity of the drug business is that certain criminal acts (illegal production, smuggling and acquisition) can be both independent components and parallel, jointly interconnected subsystems of criminal activity.

Applying the global wealth chain typology to property purchases in the Liverpool and Merseyside Area

The wealth chain is a conceptualisation of extended flows of capital operating across multiple tax jurisdictions in order to extract maximum value from investment locations. To date, such chains have largely been considered in relation to either international tax-avoiding flows of capital to offshore havens or in relation to prime property markets in major metropoles. In this article, we use new data to explain the geographical variations in asset strategies and investment types associated with different types of wealth chain in a historically deprived city region. The data relate to the purchase of real estate in the Liverpool and Merseyside Area (LMA) of the UK by companies from offshore jurisdictions. We use data to empirically model the wealth-chain concept. We compare the results from our empirically derived model with the key theoretical propositions regarding such chains. Our results confirm the actions of identifiable types of wealth chain. By geographical distribution, the specific asset strategy that dominates suggests that wealth-chain offshore investors in Liverpool’s real estate are primarily motivated by their desire to protect their identities and their assets. In the literature on the subject, these are much sought after attributes of money launderers and others involved in illicit wealth accumulation. In money terms, the dominant asset strategy is situated in a much smaller geographical space in and around the city centre. In the literature, this type of wealth chain is associated with the multinational corporations who are, theoretically, the main source of innovation in wealth-chain operations.

Where state capitalism meets the transnational capitalist state: The ties between Gazprom and Amsterdam’s offshore financial center

ABSTRACT Bringing the literature on state-owned enterprises (SOEs) and state capitalism in conversation with studies on offshore financial centers (OFCs), this paper dissects the post-2000 internationalization of Russian SOE Gazprom via the OFC of Amsterdam, the Netherlands. Not adhering to the conventional financial logics of private firms, nor exclusively following political orders of the Kremlin, Gazprom is one of the exemplary state-capital hybrids of the new state capitalism. Where Gazprom steadily increased Russia’s geopolitical leverage over Europe’s energy needs prior to the 2022 military invasion of Ukraine, we stress that “it takes two to tango”, as the internationalization of Gazprom could not have occurred without active and passive help of capitalist states elsewhere. We argue that the Netherlands functions as a transnational capitalist state in the service of foreign capital, including state capital, with Amsterdam’s corporate services providers having long provided the legal stepping stones and corporate respectability enabling Gazprom to expand internationally. In this sense, the prevalent “othering” of SOEs and state capital neglects how the global ascent of state capitalism could not have happened without dedicated assistance orchestrated in leading Western OFCs.

The firm-territory nexus in a fragmented economy: Scales of global value and wealth chain entanglement

Multinational enterprises (MNEs) take advantage of local differences in their global location of assets and activities. Scholarship in economic geography and international political economy associates value-producing entities organized in Global Value Chains (GVCs), and wealth-protecting entities in Global Wealth Chains (GWCs). At the aggregate level, these are often associated with different geographical manifestations, with GVCs centered around “production hubs” and GWCs around “offshore jurisdictions.” This indicates an asymmetrical geography between value and wealth with a low level of entanglement. This does not account, however, for the ways value and wealth are governed within MNEs. We investigate how the firm-territory nexus can be understood across scales and what this implies for the geographical overlap between GVCs and GWCs. While there is seemingly limited entanglement of GVC and GWC activities at the macro scale, at the meso scale there are overlaps and significant entanglement at the micro scale. This implies value and wealth are more geographically aligned than previously thought, and that initiatives aimed at regulating these chains needs to address practices within MNEs rather than targeting arbitrary geographies at the country level.

Drawing a veil? Privacy and anonymity in trusts and capacity proceedings

Abstract The open justice principle enshrined 110 years ago as a fundamental right at common law by the House of Lords judgment in Scott v Scott [1913] AC 417 remains as central as ever to civil proceedings in England and Wales. However, its precise ambit and content continue to provoke discussion. Where the court is not adjudicating on rival claims in hostile litigation, but is instead administering the affairs of an individual who lacks capacity or a trust, or an estate, this causes particular difficulty. To what extent, if any, does the open justice principle apply to such proceedings? This article will examine how the courts—not only in England and Wales but also by way of comparison in offshore jurisdictions—have answered this question in recent years.

Bilateral international investments: The big sur?

This paper presents novel stylized facts about the rise of the South in global finance using country-to-country data. To do so, the paper assembles comprehensive bilateral data on cross-border bank loans and deposits, portfolio investment, foreign direct investment, and international reserves from 2001 to 2018. The main findings are that investments involving the South, and especially within the South, have grown faster than those within the North. By 2018, South-to-South investments accounted for 8% of total international investments, while investments between the South and the North accounted for an additional 26%. The fastest growth occurred in portfolio investment and international reserves, whereas the slowest growth was in banking. These trends are not driven by China, any particular South region, or offshore financial centers. South-to-South investments grew the fastest even after controlling for regional GDP growth. The extensive margin played a significant role in the growth of investments within the South.

“Everyone freaks out when the leaks are made”: data leaks, investigative journalism and intelligence practice

PurposeThis paper aims to examine the history of data leaks and investigative journalism, the techniques and technology that enable them and their influence in Australia and abroad. It explores the ethical and professional considerations of investigative journalists, how they approach privacy and information-sharing and how this differs from intelligence practice in government and industry. The paper assesses the strengths and limitations of Collaborative Investigative Reporting based on Information Leaks (CIRIL) as a kind of public-facing intelligence practice.Design/methodology/approachThis study draws on academic literature, source material from investigations by the International Consortium of Investigative Journalists and the Organised Crime and Corruption Reporting Project, and a survey of financial crime compliance professionals conducted in 2022.FindingsThe paper identifies three key causal factors that have enabled the rise of CIRIL even as traditional journalism has declined: the digital storage of information; increasing public interest in offshore finance and tax evasion; and “virtual newsrooms” enabled by internet communications. It concludes that the primary strength of CIRIL is its creation of complex global narratives to inform the public about corruption and tax evasion, while its key weakness is that the scale and breadth of the data released makes it difficult to focus on likely criminal activity. Results of a survey of industry and government professionals indicate that CIRIL is generally more effective as public information than as an investigative resource, owing to the volume, age and quality of information released. However, the trends enabling CIRIL are likely to continue, and this means that governments and financial institutions need to become more effective at using leaked information.Originality/valueOver the past decade, large-scale, data-driven investigative journalism projects such as the Pandora Papers and the Russian Laundromat have had a significant public impact by exposing money laundering, financial crime and corruption. These projects share certain hallmarks: the use of human intelligence, often sourced from anonymous leaks; inventive fusion of this intelligence with data from open sources; and collaboration among a global collective of investigative journalists to build a narrative. These projects prioritise informing the public. They are also an important information source for government and private sector organisations working to investigate and disrupt financial crime.

Invisible on the globe but not in the global: Decolonising IR using small island vistas

AbstractTeaching and studying International Relations (IR) in the Caribbean makes the region’s invisibility unmissable. Nevertheless, these locales have significantly influenced the structure of global processes and are also acutely affected by global occurrences. Exposure to the global has led Caribbean scholarship to offer worthwhile insights into world affairs. Thinkers from the region and its diaspora provide noteworthy perspectives about the criticality of the Caribbean in building systems of empire and a world structured around race, class, and gender in ways that mainstream IR approaches may miss. This article takes its starting point as the Caribbean intellectual tradition. Grounding IR scholarship in this neglected, though highly pertinent, thought tradition is one angle from which to decolonise the discipline. The article connects these insights to an appraisal of a nimble strategy that Caribbean states and territories employ to navigate the global. The strategy of developing offshore financial centres (OFCs) can educate us about the functioning of the world if we are willing to think about it as embedded in global processes rather than as a problematic gimmick. In sum, this piece illustrates how using Caribbean thought and examining Caribbean global integration strategies can help to decolonise IR.

Becoming global billionaires from mainland China: 2004–2018

This paper documents the increase in the number of global billionaires from mainland China between 2004 and 2018. One of the key findings is that under conditions of an open economy, grassroots billionaire entrepreneurs (e.g., Jack Ma) could mitigate political economy as well as financial frictions via capital injections from foreign venture capitalists. By building a unique database, I report that (i) the politically unconnected billionaire entrepreneurs financed by foreign venture capitalists are more likely to go public their companies outside mainland China (mainly in Hong Kong and the USA), use offshore financing vehicles, and enter the innovation sector and (ii) the politically connected global billionaire entrepreneurs, however, are closely associated with a record of state-owned enterprise (SOE) restructuring.Plain English SummaryThe increase in the number of billionaire entrepreneurs (e.g., Jack Ma) from mainland China between 2004 and 2018 is a new phenomenon, which necessitates a reassessment of the crony capitalism arguments, the types of entrepreneurs, and the sources of innovation. This paper has important implications for future research on entrepreneurship in a global economy and the design of relevant policies.

The state of the global financial architecture: current trends and prospects for reform

Methods. The methodological basis of the research is a system of general scientific and specific methods, in particular, the method of logical analysis made it possible to build the logic of the research; the method of comparison – to assess the key parameters of the global financial architecture; analysis and synthesis – to generalize research results, the deduction method – to single out individual factors affecting the state of the modern world financial architecture. The graphic method made it possible to visualize the obtained research results. Results. The article is devoted to defining the trends of the world financial architecture. The structure of the modern world financial architecture, which includes global, regional and national levels, has been formed. The main problems of the global financial system have been identified, such as: the emergence of «bubbles» in some of its segments; increased volatility of international capital flows; volatility of exchange rates, etc. A list of global indicators influencing the global financial architecture has been determined. The need to reform the world financial architecture as a result of the global economic crisis of 2008–2009 is substantiated. The main directions of reforming the world financial architecture are identified: global financial management; banking sector; over-the-counter derivatives market and fight against offshore jurisdictions. New risks were identified, which caused the need to develop new mechanisms for reforming the global financial architecture at the end of 2018 – the beginning of 2020, the threat of new crises in countries with markets based on the principle of the «contagion effect». The impact of the pandemic on the world stock market was studied through the dynamics of the FTSE, Dow Jones Industrial Average and Nikkei indices. The article substantiates that an important aspect of the current state of the global financial architecture is the wide implementation of FinTech innovations. It has been proven that the war situation in Ukraine definitely affects the state of the financial architecture due to the strengthening of global inflation and the tightening of monetary policy by Ukraine's partner countries. Novelty. The originality and value of the research lies in the formation of a methodology for diagnosing the state of the world financial architecture. The main trends in the functioning of the world financial architecture have been determined. The importance of FinTech for achieving progressive changes in the global financial system and the development of the global financial architecture is determined. Practical value. There is substantiated the practical role of certain factors, which made it possible to determine the trends of the current state of the world financial architecture, which will become an analytical basis for assessing the degree of development of the financial architecture of the countries of the world.

China’s recognition and enforcement of foreign securities judgments against overseas-listed Chinese companies

Abstract Over the past decades, a growing number of Chinese companies have been listed overseas, notably in the USA and Hong Kong. They are subject to the securities regulation of listing places and can be sued thereunder against their securities misconduct. As overseas-listed Chinese companies usually have their main assets located in China, it is important that Chinese courts recognize and enforce foreign securities judgments. However, there are many difficulties in this area, which undermine the efficacy of the regulation of cross-border securities transactions. In quest of solutions, this article assesses the possibility of suing Chinese companies in the offshore financial centres where they are incorporated, finding that there would be similar issues with judgment enforcement in China. It also examines the viability of using arbitration as an alternative, arguing that arbitration may only supplement, rather than substituting, court litigation for resolving securities disputes. China should consider signing a bilateral treaty with the USA, clarifying the principle of reciprocity, and ratifying the 2005 Hague Choice of Court Convention and even the 2019 Hague Judgment Convention. Hong Kong is also advised to expand its current judgment recognition arrangement with Mainland China to cover securities judgments and join the relevant international conventions.

Chapter 1. Introduction

Abstract Sequence stratigraphy has become a powerful tool in the basin analysis of the North Sea Basin, and will continue to be important in the maximization of the remaining hydrocarbon resources of Jurassic reservoirs in the region, whilst also moving through the energy transition. This chapter provides background to the main theme of this memoir, which is the description of a revised sequence stratigraphy scheme for the Jurassic–lowermost Cretaceous of the region, recognizing 39 stratigraphic sequences (‘J sequences’). The sequences are illustrated by 85 reference wells (56 UK wells, 22 Norway wells and seven Denmark wells), showing chronostratigraphy, lithostratigraphy, wireline logs and key biostratigraphic markers. The reference wells illustrate sequence development, together with their lower and upper boundaries. Comparisons of the North Sea Jurassic sequences with onshore outcrop sections, from the UK, demonstrate that many of the sequences can be recognized onshore. A comparison of the well sequences with seismic sequences is made in 17 illustrated seismic lines, demonstrating the seismic expression of many of the defined sequences. The recognition of a consistent set of stratigraphic sequences across the region allows a much better understanding of the development of the whole area during the Jurassic, which is currently hindered by the existence of multiple local and semi-regional lithostratigraphic schemes, in particular the differing notations that are utilized in the various international offshore jurisdictions that exist across the area.

China in Tax Havens

We document the rise of China in offshore capital markets. Chinese firms use global tax havens to access foreign capital in both equity and bond markets. In the last 20 years, China's presence went from raising a negligible amount of capital in these markets to accounting for more than half of equity issuance and around a fifth of global corporate bonds outstanding in tax havens. Using rich micro data, we show that a range of Chinese firms, including both tech giants and state-owned enterprises, use these offshore centers. We conclude by discussing the macroeconomic and financial stability implications of these patterns.

Fairylands: Bermuda’s ‘Idyllic’ (and Exclusive) Enclave

19th century Victorian-era romanticism fuelled popular fascination with fairytales and a trend of fairy-themed place naming in Britain and its colonies and territories. The idealising of small islands that served colonial interests as plantations, prisons, military outposts, and maritime trade posts as idyllic, picturesque, fairytale places evoked attributes of empire while maintaining the status quo of dominant colonial culture. The development of tourism, offshore financing and real estate industries perpetuated the idealism of fairy-themed imaginative place naming of islands and island locations into the next century. This article examines the case of Bermuda as a promoted ‘fairy land’ and its exclusive enclave, Fairylands, through a synthesis of archival analysis and auto-ethnography and contributes to the development of toponymic studies in island research and culture.