This paper addresses the role of power and politics in setting standards. It examines the interaction of external contingencies, powerful agents, resources, meaning, and membership of relevant social ...and institutional groupings in generating successful political outcomes. To study these interactions, the paper adopts the circuits of power, a theoretical framework taken from the social sciences, and applies it to understanding the creation and development of the first standard in information security management. An informal group of UK security chiefs sparked off a process which led first to BS7799, the British standard, and later to ISO 17799, the international standard. The case study portrays how the institutionalization of this ad hoc development process results from the interactions of power among the stakeholders involved. The case study also shows how the different interests and objectives of the stakeholders were influenced by exogenous contingencies and institutional forces. The paper discusses theoretical and practical implications for the future development of such standards.
We examine the capital-market effects of changes in securities regulation in the European Union aimed at reducing market abuse and increasing transparency. To estimate causal effects for the ...population of E.U. firms, we exploit that for plausibly exogenous reasons, such as national legislative procedures, E.U. countries adopted these directives at different times. We find significant increases in market liquidity, but the effects are stronger in countries with stricter implementation and traditionally more stringent securities regulation. The findings suggest that countries with initially weaker regulation do not catch up with stronger countries, and that countries diverge more upon harmonizing regulation.
The last several decades have witnessed a shift away from a fully rational paradigm of financial markets toward one in which investor behavior is influenced by psychological biases. Two principal ...factors have contributed to this evolution: a body of evidence showing how psychological bias affects the behavior of economic actors; and an accumulation of evidence that is hard to reconcile with fully rational models of security market trading volumes and returns. In particular, asset markets exhibit trading volumes that are high, with individuals and asset managers trading aggressively, even when such trading results in high risk and low net returns. Moreover, asset prices display patterns of predictability that are difficult to reconcile with rational expectations-based theories of price formation. In this paper, we discuss the role of overconfidence as an explanation for these patterns.
Efficiently Inefficient describes the key trading strategies used by hedge funds and demystifies the secret world of active investing. Leading financial economist Lasse Heje Pedersen combines the ...latest research with real-world examples and interviews with top hedge fund managers to show how certain trading strategies make money--and why they sometimes don't. Pedersen views markets as neither perfectly efficient nor completely inefficient. Rather, they are inefficient enough that money managers can be compensated for their costs through the profits of their trading strategies and efficient enough that the profits after costs do not encourage additional active investing. Understanding how to trade in this efficiently inefficient market provides a new, engaging way to learn finance. Pedersen analyzes how the market price of stocks and bonds can differ from the model price, leading to new perspectives on the relationship between trading results and finance theory. He explores several different areas in depth--fundamental tools for investment management, equity strategies, macro strategies, and arbitrage strategies--and he looks at such diverse topics as portfolio choice, risk management, equity valuation, and yield curve logic. The book's strategies are illuminated further by interviews with leading hedge fund managers: Lee Ainslie, Cliff Asness, Jim Chanos, Ken Griffin, David Harding, John Paulson, Myron Scholes, and George Soros. Efficiently Inefficient effectively demonstrates how financial markets really work.Free problem sets are available online at https://www.lhpedersen.com.
Whistleblowers are ostensibly a valuable resource to regulators investigating securities violations, but whether there is a link between whistleblower involvement and the outcomes of enforcement ...actions is unclear. Using a data set of employee whistleblowing allegations obtained from the U.S. government and the universe of enforcement actions for financial misrepresentation, we find that whistleblower involvement is associated with higher monetary penalties for targeted firms and employees and with longer prison sentences for culpable executives. We also find that regulators more quickly begin enforcement proceedings when whistleblowers are involved. Our findings suggest that whistleblowers are a valuable source of information for regulators who investigate and prosecute financial misrepresentation.
An extensive literature examines the causes and effects of financial misconduct based on samples drawn from four popular databases that identify restatements, securities class action lawsuits, and ...Accounting and Auditing Enforcement Releases (AAERs). We show that the results from empirical tests can depend on which database is accessed. To examine the causes of such discrepancies, we compare the information in each database to a detailed sample of 1,243 case histories in which regulators brought enforcement actions for financial misrepresentation. These comparisons allow us to identify, measure, and estimate the economic importance of four features of each database that affect inferences from empirical tests. We show the extent to which each database is subject to these concerns and offer suggestions for researchers using these databases.
This study examines whether revolving rating analysts who transition from major rating agencies to issuers are associated with any rating inflation in the issuers’ mortgage-backed securities (MBS) or ...asset-backed securities (ABS). Using professional profiles posted on LinkedIn to identify revolving rating analysts with structured finance rating experience, we find that the more the issuers employ such analysts, the more likely that ratings of issuers’ MBS and ABS new issuances are inflated compared with otherwise similarly rated securities. Additional analyses show that the impact of revolving rating analysts is more pronounced in complex deals and when the revolving analysts are more senior, indicating that rating expertise in structured finance may play a role in MBS and ABS rating inflation. Finally, we find that at least for AAA-rated MBS and ABS, investors fail to see through the rating inflation associated with revolving rating analysts.
The online appendix is available at
https://doi.org/10.1287/mnsc.2017.2921
.
This paper was accepted by Shivaram Rajgopal, accounting.
What Works in Securities Laws? LA PORTA, RAFAEL; LOPEZ-DE-SILANES, FLORENCIO; SHLEIFER, ANDREI
The Journal of finance (New York),
February 2006, Letnik:
61, Številka:
1
Journal Article
Recenzirano
Odprti dostop
We examine the effect of securities laws on stock market development in 49 countries. We find little evidence that public enforcement benefits stock markets, but strong evidence that laws mandating ...disclosure and facilitating private enforcement through liability rules benefit stock markets.
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