The spatial reach of financial centres: An empirical investigation of interurban trade in capital market services

This article investigates the spatial patterns of interurban trade in capital market services by analysing 16,324 trade links involving advisers and clients in the Visegrád Four plus Austria and their counter-parties worldwide between 2000 and 2014. We aim to address a gap in the research on financial centres and interurban trade by providing empirical evidence on the relationship between the complexity of services and the size of market areas across which they are traded. We utilise recent contributions to Central Place Theory (CPT), which provide us with suitably general models of interurban trade applicable to financial services. The key proposition of CPT in this respect is that more complex services are traded across larger market areas, thus translating into a further spatial reach of service centres. Given that these propositions are derived at a very general level, we rely on global city theory for explaining the underlying causal mechanisms in the context of capital market services. Our analysis examines the geography of adviser–client trade links to investigate how spatial patterns of interurban trade in capital market services are shaped by the characteristics of the services traded. We uncover evidence that more complex and larger transactions are associated with higher distance between clients and financial services providers. This in turn means that more complex services are traded across larger market areas. While clients in Central and Eastern Europe can generally find suitable providers for less complex capital market services locally, they often rely on financial services providers globally for the most complex transactions.