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Seminar Series

Seminar Series

Todd Arthur Bridges, Cornell University

Governing Shades of Grey: The Emergence of Market Governance in the Absence of Formal Regulation

Please join us for the first Institutions, Market Processes and the Firm Seminar. Todd Arthur Bridges will present his research on “Governing Shades of Grey: The Emergence of Market Governance in the Absence of Formal Regulation.”

Abstract

Since the 1980s, a market-based institutional structure has been developing in parallel with the traditional bank-based structure and has supplanted the traditional system as the dominant source of credit for the US economy. However, the growth of this new parallel system has not been accompanied by a corresponding expansion of the formal laws and regulations that govern economic action. As a result, large sectors of the economy operate beyond traditional law and regulation and pose systemic risks to the broader economy and society. This article identifies and explicates the governance mechanisms that have emerged in one of the major markets in the new parallel system—the US hedge fund market. The empirical data for this study come from three years of field research and 40 semi-structured interviews with expert informants. This article advances a multilevel causal model of markets with research findings suggesting that (1) the emergence of a governing social order is the result of interactions between the formal institutional environment regulating the traditional financial system and the social relations, informal norms, and institutionalized practices of parallel financial organizations, and (2) governance failures emerge at specific locations where the formal and informal governance mechanisms break down.

About

Todd Arthur Bridges is managing director at the Center for the Study of Economy and Society. His research interests are in economic sociology, sociology of finance, behavioral finance, networks and institutions, mixed methods research, meso-level social order, and extra-legal governance. Todd’s graduate training, research assistantships, and teaching fellowships were done at Brown University, Harvard University, MIT, and The University of Chicago. During the 2010-2011 academic year he was a visiting fellow at the University of Oxford. During the 2011-2012 academic year he was a postdoctoral fellow at an institute within the Max Planck Society for the Advancement of Science.

“[T]he challenge is to specify and explicate the social mechanisms determining the relationship between the informal social organization of close-knit groups and the formal rules of institutional structures.”— Victor Nee