The Anglo-Saxon market for corporate control, the financial system and international competitiveness: notes for the Notre Dame conference on "strengthening U.S. competitiveness"

Abstract The last decade has witnessed a growing debate on both sides of the Atlantic on the effectiveness of the stock market based financial systems of the U.S. and the U.K. for promoting international competitiveness and industrial strength. The two countries share a broadly common framework of corporate law and possess the most advanced and complete stock markets in the world. As far as the corporate sector is concerned, in both countries, the financial system is more or less similar, being dominated by the stock market and a vigorously functioning market for corporate control. In principle, the latter is supposed to constitute an important additional mechanism by means of which the stock market can discipline firms and promote corporate efficiency. However, an increasing number of industrialists as well as academic economists argue that the Anglo-Saxon financial system is inferior to that of Japan and Germany and puts the former countries at a competitive disadvantage.