A Comparative Financial Power Approach

Abstract Chapter 2 develops our theoretical framework. It begins by reviewing explanations in international and comparative political economy, and theories of business power, to explain why they offer an inadequate account of patterns of bank structural reform across advanced economies. To address these limitations, we turn to the literature on interest group lobbying, which points to the importance of the relational context and ‘financial unity’ as key determinants of financial power, and from which we derive our first hypothesis about variation in the stringency of structural reform. This section also draws on theories of interest representation to specify our empirical expectations about cross-national variation, differentiating between ‘competitive’ and ‘cooperative’ forms of financial power. Next, the chapter considers the institutional context of financial power, reviewing theories of agenda setting and venue shifting to derive our second hypothesis about the (de)politicization of banking reform. The final section pulls these insights together by presenting our comparative financial power framework: combining the two explanatory variables—interest group lobbying and venue shifting—to produce a two-by-two typology of different banking reform outcomes: durable, contested, symbolic, and no reform.