Lets first have a look where Common Law exists [1]. OK, that's pretty easy: It is FVEY plus some islands.
Now lets have a look at the Corruption Perception Index [2] (alternatively, just check the picture at [3]). The UK and US are at place 12 and 17 respectively. The top 10 is comprised of: Denmark, Finland, Sweden, New Zealand, Netherlands, Norway, Switzerland, Singapore, Canada, Germany. I count 2 common law (New Zealand, Canada), and at least 7 Civil Law (I'm not including Singapore because I don't know what kind of law system they have; the list is including that pesky Germany who according to your source have high corruption). I fail to see your pattern.
[1] https://upload.wikimedia.org/wikipedia/commons/9/92/Map_of_t...
[2] https://en.wikipedia.org/wiki/Corruption_Perceptions_Index
[3] https://upload.wikimedia.org/wikipedia/commons/b/b4/Transpar...
London bankers' skills are unlikely to efficiently translate to Paris. Moreover, Paris can support less financial activity for having a bank-based economy--banks can't process at the throughputs markets can.
> I fail to see your pattern
The paper considers more than ten European countries. I included the postscript because I found it interesting, not because it's particularly germane to the article topic.
I replied because I saw your quote contained a possible inaccuracy. When I investigated that specific part, I found contradicting proof of a causal relationship between French Civil Law tradition and corruption. Which is what your quote was implying. I didn't attempt to verify anything else, but I'm highly skeptical.
Either that, or I read wrong and what is being implied with:
> Countries with a French Civil Law tradition, poor protection of shareholder and creditor rights, poor contract enforcement, high levels of corruption, poor accounting standards, restrictive banking regulations, and high inflation tend to have underdeveloped financial systems.
(Emphasis mine.)
is that these are all requirements due to and.
Which further is suggested by the quote hereunder that countries with high income such as France, Germany, and Benelux (all of which are original members of the EEC/EC) are not meant to be included in the list you mentioned.
> In higher income countries, stock markets become more active and efficient relative to banks. There is some tendency for national financial systems to become more market oriented, as they become richer.
But hey, if you want to prove your point feel free to prove -with sources- France, Germany, and Benelux each have:
* Poor protection of shareholder and creditor rights
* Poor contract enforcement
* Poor accounting standards
* Restrictive banking regulations
* High inflation
The paper divides economies into three buckets: market-based, bank-based and underdeveloped. It does this by looking at economic factors. It then looks at what other factors, Y, are similar between countries in each bucket. This doesn't work going backwards.
By analogy, suppose I have circles, squares and triangles in blue, green and orange. It is meaningful to group by shape. It may also be meaningful to observe that 90% of the triangles are blue. It does not follow that a random blue shape is a triangle.
I know it doesn't because the paper is linking certain properties it observes without proving the causation, and then tries mention them as if they're relevant while in reality there's no relevance shown.
(For example, an alternative plausible explanation could be a relation between corruption and wealth.)
> By analogy, suppose I have circles, squares and triangles in blue, green and orange. It is meaningful to group by shape. It may also be meaningful to observe that 90% of the triangles are blue. It does not follow that a random blue shape is a triangle.
Imagine shapes and colours can change, and there's no proof the change is related to the shapes or colours. Imagine the conclusion for the 'blue' is 'beautiful'. Does it then matter to mention that the blue ones happen to be 'beautiful' and 'mostly triangles'? Is it a relevant conclusion that the 'non-beautiful' are 'mostly not triangles' or 'that they are not beautiful because they're mostly not triangles'? The latter is what your quote implied, and its merely suggestive. You have no proof.
Because correlation is not causation. So why does the paper mention it? If you're not willing to prove the missing point, why do you quote it?
I'm not saying Paris isn't a financial centre. It's just in a different league compared to London, NYC, Singapore, Hong Kong or Tokyo.
> The physical location of the trading desks relative to the markets matters little
Making markets requires plugging into financial and political power structures. Due to home-country effects, buyers and sellers of a security tend to congregate around the issuer.
A Singapore desk will hand off to New York to execute an order by a Singaporean buyer and American seller. Note: we're not talking about hedge funds. We're talking about investment bankers, sales-traders and market makers--relationship-driven businesses.
That's true. But the point here is that a lot of London's banking depends on unfettered access to the EU markets, and so the question is not "which city", but "which city in the EU" will take over once the UK exits the EU.
> Making markets requires plugging into financial and political power structures. Due to home-country effects, buyers and sellers of a security tend to congregate around the issuer.
That matters for some roles, but certainly not all. But this same arguments also is part of the exact reason why the UK faces an onslaught post-Brexit.
But how come (French) Civil Law is to be 'a bug'? To me Civil Law seems superior, because it tends to make law more codified and less informal. In return it seems to be more affordable for the masses. If you're considering where to locate your startup for example, the differential in litigation costs between UK and Germany is said to be 3 to 1. But really, I'd like to know what you think.
The paper divides economies into three buckets: market-based, bank-based and underdeveloped. French Civil Law is found in a disproportionate number of underdeveloped economies. I suspect this has to do with France's colonial traditions more than the merits of civil versus common law. (Based on what I've read, both legal systems have produced advanced, albeit structurally different, economies.)
[1] https://en.wikipedia.org/wiki/Common_law#/media/File:Map_of_...
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[2] https://de.wikipedia.org/wiki/Common_Law#/media/File:Common_...
"In bank-based financial systems such as Germany and Japan, banks play a leading role in mobilizing savings, allocating capital, overseeing the investment decisions of corporate managers, and in providing risk management vehicles. In market-based financial systems such as England and the United States, securities markets share center stage with banks in terms of getting society’s savings to firms, exerting corporate control, and easing risk management." [1]
France is a bank-based economy. Britain is market based. London's financial dominance pre-dates the EU for good reasons.
[1] http://documents.worldbank.org/curated/en/259341468739463577... Introduction, Table 11, Table 12
Postscript:
"• In higher income countries, stock markets become more active and efficient relative to banks. There is some tendency for national financial systems to become more market oriented, as they become richer.
• Countries with a Common Law tradition, strong protection of shareholder rights, good accounting regulations, low levels of corruption, and no explicit deposit insurance tend to be more market-based.
• Countries with a French Civil Law tradition, poor protection of shareholder and creditor rights, poor contract enforcement, high levels of corruption, poor accounting standards, restrictive banking regulations, and high inflation tend to have underdeveloped financial systems." page 5