This study seeks to establish if the adoption of International Financial Reporting Standards (IFRS) in Kenya has been associated with higher accounting quality for listed companies based on the theory that IFRS adoption has benefits such as transparency, accounting quality and reduced cost of capital. By applying quantitative techniques and responding to suggestions on country specific studies, accounting quality measures of earnings management, timely loss recognition and value relevance were analyzed. There was increased variability in earnings in the post adoption period as analyzed by Levenes test for variances with f and p values of 0.000 (5. The rest of the measures showed insignificant variations. Previous research examined the effects of IFRS adoption mainly in the EU on the impact of IFRS adoption using quantitative techniques with literature citing gaps and conflicting conclusions on accounting quality changes. In contrast, the current research in a common law developing country has shown that IFRS insignificantly improves accounting quality under different circumstances which can be generalized in developing countries. This contribution matters as it implies more debates and better methods to be researched on while adopters to be assured that insignificant improvements appear to be related to compliance and adoption strategies most of which are continuously addressed by the Standard setters and regulators.
{"title":"The Impact of International Financial Reporting Standards (IFRS) Adoption on the Accounting Quality of Listed Companies in Kenya","authors":"E. Outa","doi":"10.2139/ssrn.1976146","DOIUrl":"https://doi.org/10.2139/ssrn.1976146","url":null,"abstract":"This study seeks to establish if the adoption of International Financial Reporting Standards (IFRS) in Kenya has been associated with higher accounting quality for listed companies based on the theory that IFRS adoption has benefits such as transparency, accounting quality and reduced cost of capital. By applying quantitative techniques and responding to suggestions on country specific studies, accounting quality measures of earnings management, timely loss recognition and value relevance were analyzed. There was increased variability in earnings in the post adoption period as analyzed by Levenes test for variances with f and p values of 0.000 (5. The rest of the measures showed insignificant variations. Previous research examined the effects of IFRS adoption mainly in the EU on the impact of IFRS adoption using quantitative techniques with literature citing gaps and conflicting conclusions on accounting quality changes. In contrast, the current research in a common law developing country has shown that IFRS insignificantly improves accounting quality under different circumstances which can be generalized in developing countries. This contribution matters as it implies more debates and better methods to be researched on while adopters to be assured that insignificant improvements appear to be related to compliance and adoption strategies most of which are continuously addressed by the Standard setters and regulators.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131377448","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The American Recovery and Reinvestment Act (ARRA) was enacted to stimulate the economy during a significat economic downturn. ARRA contained new accountability mechanisms were enacted to reduce fraud and wasteful spending. These new mechanisms were touted as a creating an unprecedented level of oversight and transparency. While the Government has taken a step in the right direction, some of these new oversight mechanisms such as Recovery.gov and the Recovery Act Accountability Board have not lived up to expectations. While the ARRA posed significant challenges, the accountability mechanisms that Congress put in place seemed, on balance, to workwell. In fact, the House of Representatives has legislation before it that would employ the ARRA accountability mechanisms permanently, across the Government.
{"title":"Oversight: Accountability in the American Recovery and Reinvestment Act","authors":"William Selinger","doi":"10.2139/SSRN.1933560","DOIUrl":"https://doi.org/10.2139/SSRN.1933560","url":null,"abstract":"The American Recovery and Reinvestment Act (ARRA) was enacted to stimulate the economy during a significat economic downturn. ARRA contained new accountability mechanisms were enacted to reduce fraud and wasteful spending. These new mechanisms were touted as a creating an unprecedented level of oversight and transparency. While the Government has taken a step in the right direction, some of these new oversight mechanisms such as Recovery.gov and the Recovery Act Accountability Board have not lived up to expectations. While the ARRA posed significant challenges, the accountability mechanisms that Congress put in place seemed, on balance, to workwell. In fact, the House of Representatives has legislation before it that would employ the ARRA accountability mechanisms permanently, across the Government.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115280470","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article suggests that increased, fragmented regulation of Direct-to-Consumer genetic testing, as proposed by many commentators and interest groups, will not benefit consumers and risks hampering American innovation. This article briefly discusses some of the problems that can occur with broad, multi-agency regulation and specifically why it is unwarranted and ill-advised for Direct-to-Consumer genetic testing. Rather than focusing on hypothetical consumer harms, this article takes a holistic approach, taking into consideration the welfare of consumers and our nation’s interest in promoting innovation. The article goes on to propose a solution that refreshingly simple yet will maximize the benefits of the innovation while minimizing risks to consumers. The article theorizes that by simplifying the regulation scheme and decreasing the number of agencies involved, the remaining agencies will take greater ownership over the regulation and consumers will benefit.
{"title":"If the Genes Fit, Wear Them: A Proposal for Light-Handed Regulation of Direct-to-Consumer Genetic Tests from the Federal Trade Commission as a Solution to a Regulatory Commons Problem","authors":"Craig C. Carpenter","doi":"10.2139/SSRN.1962985","DOIUrl":"https://doi.org/10.2139/SSRN.1962985","url":null,"abstract":"This article suggests that increased, fragmented regulation of Direct-to-Consumer genetic testing, as proposed by many commentators and interest groups, will not benefit consumers and risks hampering American innovation. This article briefly discusses some of the problems that can occur with broad, multi-agency regulation and specifically why it is unwarranted and ill-advised for Direct-to-Consumer genetic testing. Rather than focusing on hypothetical consumer harms, this article takes a holistic approach, taking into consideration the welfare of consumers and our nation’s interest in promoting innovation. The article goes on to propose a solution that refreshingly simple yet will maximize the benefits of the innovation while minimizing risks to consumers. The article theorizes that by simplifying the regulation scheme and decreasing the number of agencies involved, the remaining agencies will take greater ownership over the regulation and consumers will benefit.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134325131","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We model the failed bank resolution process as a repeated game between a utility-maximizing government resolution authority (RA) and a profit-maximizing banking industry. Limits to resolution technology and political/economic pressure create incentives for the RA to bail out failed complex banks; the inability of the RA to credibly commit to closing these banks creates an incentive for bank complexity. We solve the game in mixed strategies and find equilibrium conditions remarkably descriptive of government responses to actual and potential large bank insolvencies during the recent financial crisis. The central role of the technology constraint in this model highlights a crucial determinant of failed bank resolution policy that has been overlooked in the theory literature to date; without improved resolution technologies, future bank bailouts are inevitable. The effects of political pressure in this model remind us that regulatory reform (e.g., Dodd-Frank) is only as good as the regulators that implement the reform.
{"title":"A Theory of Failed Bank Resolution: Technological Change and Political Economics","authors":"Robert DeYoung, M. Kowalik, Jack Reidhill","doi":"10.2139/ssrn.2165527","DOIUrl":"https://doi.org/10.2139/ssrn.2165527","url":null,"abstract":"We model the failed bank resolution process as a repeated game between a utility-maximizing government resolution authority (RA) and a profit-maximizing banking industry. Limits to resolution technology and political/economic pressure create incentives for the RA to bail out failed complex banks; the inability of the RA to credibly commit to closing these banks creates an incentive for bank complexity. We solve the game in mixed strategies and find equilibrium conditions remarkably descriptive of government responses to actual and potential large bank insolvencies during the recent financial crisis. The central role of the technology constraint in this model highlights a crucial determinant of failed bank resolution policy that has been overlooked in the theory literature to date; without improved resolution technologies, future bank bailouts are inevitable. The effects of political pressure in this model remind us that regulatory reform (e.g., Dodd-Frank) is only as good as the regulators that implement the reform.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"238 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123323243","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The CFTC adopted new market manipulation rules on July 7, 2011. In addition to retaining the Commission's existing anti-manipulation authority under the CEA's "artificial price" standard, these rules give the Commission the ability to bring enforcement actions under a "fraud-based" standard structured on the SEC's Rule 10b-5, much like the statutes now in place at the FERC and FTC. Unfortunately, uniformity across statutes has yet to provide market participants with much needed direction as to the specific types of behavior that are prohibited. This is especially concerning for firms in the energy sector, who face dual regulation by the CFTC and the FERC or FTC, with possible SEC intervention to the extent that securities are involved in purported manipulations. For global energy providers, the potential complexities only grow given that the European Union is considering its own anti-manipulation rules under the REMIT Proposal. This short paper addresses the need for uniformity by articulating a framework for the analysis of market manipulation that applies across cases, agencies, statutes and (now potentially) nations. This framework simplifies the economic decision making involved in executing a manipulation to a cost/benefit analysis that is both economically and legally straightforward and cogent. Adoption of this framework could reduce the uncertainty associated with anti-manipulation laws and regulations, thus minimizing compliance costs for market participants and maximizing the efficient use and coordination of scarce regulatory resources.
{"title":"Triggers and Targets: The Anatomy of Market Manipulation","authors":"S. Ledgerwood","doi":"10.2139/ssrn.1893225","DOIUrl":"https://doi.org/10.2139/ssrn.1893225","url":null,"abstract":"The CFTC adopted new market manipulation rules on July 7, 2011. In addition to retaining the Commission's existing anti-manipulation authority under the CEA's \"artificial price\" standard, these rules give the Commission the ability to bring enforcement actions under a \"fraud-based\" standard structured on the SEC's Rule 10b-5, much like the statutes now in place at the FERC and FTC. Unfortunately, uniformity across statutes has yet to provide market participants with much needed direction as to the specific types of behavior that are prohibited. This is especially concerning for firms in the energy sector, who face dual regulation by the CFTC and the FERC or FTC, with possible SEC intervention to the extent that securities are involved in purported manipulations. For global energy providers, the potential complexities only grow given that the European Union is considering its own anti-manipulation rules under the REMIT Proposal. This short paper addresses the need for uniformity by articulating a framework for the analysis of market manipulation that applies across cases, agencies, statutes and (now potentially) nations. This framework simplifies the economic decision making involved in executing a manipulation to a cost/benefit analysis that is both economically and legally straightforward and cogent. Adoption of this framework could reduce the uncertainty associated with anti-manipulation laws and regulations, thus minimizing compliance costs for market participants and maximizing the efficient use and coordination of scarce regulatory resources.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124267218","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Companies can choose their place of incorporation and with it, the law governing their internal affairs. More than 60% of large public companies choose to incorporate in Delaware. Scholars have argued, for more than two decades, that it should be proof that Delaware law is efficient and have attempted to explain why. Among the ongoing debate on state competition over corporate charters, the dominant view has been the ‘race to the top’ school of thought. Nonetheless, a growing number of scholars and practitioners argue that the state competition over corporate charters lead to a ‘race to the bottom’. This Article reports the results of an empirical study comparing the Delaware incorporated companies’ propensity to file for bankruptcy with the other US companies’ propensity to file for bankruptcy. I found that Delaware companies are more likely to file for bankruptcy. This is evidence that incorporating in Delaware may not be efficient. Also, I found that, on average, Delaware companies had a lower ratio of liabilities to assets from 1999 to 2009. But the ten percent of Delaware companies having the highest leverage ratios have higher leverage ratios between 1991 and 2009 than the same group of companies incorporated in all other states. Hence, this paper provides evidence that the more leveraged companies chose to incorporate in Delaware. This paper argues that enacting corporate law to please corporate promoters may not be in the best interest of corporations.
{"title":"Delaware Bankruptcy Prone","authors":"Celine Gainet","doi":"10.2139/ssrn.1945018","DOIUrl":"https://doi.org/10.2139/ssrn.1945018","url":null,"abstract":"Companies can choose their place of incorporation and with it, the law governing their internal affairs. More than 60% of large public companies choose to incorporate in Delaware. Scholars have argued, for more than two decades, that it should be proof that Delaware law is efficient and have attempted to explain why. Among the ongoing debate on state competition over corporate charters, the dominant view has been the ‘race to the top’ school of thought. Nonetheless, a growing number of scholars and practitioners argue that the state competition over corporate charters lead to a ‘race to the bottom’. This Article reports the results of an empirical study comparing the Delaware incorporated companies’ propensity to file for bankruptcy with the other US companies’ propensity to file for bankruptcy. I found that Delaware companies are more likely to file for bankruptcy. This is evidence that incorporating in Delaware may not be efficient. Also, I found that, on average, Delaware companies had a lower ratio of liabilities to assets from 1999 to 2009. But the ten percent of Delaware companies having the highest leverage ratios have higher leverage ratios between 1991 and 2009 than the same group of companies incorporated in all other states. Hence, this paper provides evidence that the more leveraged companies chose to incorporate in Delaware. This paper argues that enacting corporate law to please corporate promoters may not be in the best interest of corporations.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129334036","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we investigate the timing, volume, and profitability of insider trading has changed over time corresponding to changes in the regulatory environment over the period 1986-2008. Consistent with increased regulatory scrutiny, we find that there has been a steady increase over time in the proportion of trades by insiders that occur right after quarterly earnings announcements, and that more and more firms appear to adopt policies to restrict their insider trading. Along with these changes in the timing of insider transactions, we provide evidence that the overall informativeness of insider trading has also decreased over time, and that the profitability of insider trading completely disappears in the post-2002 period following the implementation of SOX. Examining firms with restrictions on insider trading, we find that insiders in these firms continue to take advantage of positive information but are more careful in exploiting negative information. The results suggest that insiders react strategically to changes in the regulatory environment.
{"title":"The Effect of Regulation on the Volume, Timing, and Profitability of Insider Trading","authors":"I. Lee, M. Lemmon, Yan Li, J. M. Sequeira","doi":"10.2139/ssrn.1824185","DOIUrl":"https://doi.org/10.2139/ssrn.1824185","url":null,"abstract":"In this paper, we investigate the timing, volume, and profitability of insider trading has changed over time corresponding to changes in the regulatory environment over the period 1986-2008. Consistent with increased regulatory scrutiny, we find that there has been a steady increase over time in the proportion of trades by insiders that occur right after quarterly earnings announcements, and that more and more firms appear to adopt policies to restrict their insider trading. Along with these changes in the timing of insider transactions, we provide evidence that the overall informativeness of insider trading has also decreased over time, and that the profitability of insider trading completely disappears in the post-2002 period following the implementation of SOX. Examining firms with restrictions on insider trading, we find that insiders in these firms continue to take advantage of positive information but are more careful in exploiting negative information. The results suggest that insiders react strategically to changes in the regulatory environment.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115139062","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We provide a micro-based rationale for macroprudential capital regulation by developing a model in which bankers can privately undertake a costly effort and reduce the probability of adverse shocks to their asset holdings that force liquidation (deterioration risk). Low fundamental risk of assets guarantees benevolent funding conditions and banks are able to expand their balance sheets. The high continuation value would, in principle, improve incentives. However, the rise in asset demand and prices may jeopardize bankers' efforts whenever the liquidation price is high enough. This imposes socially inefficient liquidation which can be corrected with a capital requirement that aligns bankers' incentives. We show that a microprudential regulatory regime that disregards the equilibrium effect of asset prices on incentives performs poorly as low fundamental risk may induce high deterioration risk. Overall, the model suggests a theoretical foundation for the countercyclical capital buffer of Basel III, since it prescribes a macroprudential regulatory regime in which the equilibrium feedback effect is fully taken into account.
{"title":"Incentives Through the Cycle: Microfounded Macroprudential Regulation","authors":"G. di Iasio, Mario Quagliariello","doi":"10.2139/ssrn.1744325","DOIUrl":"https://doi.org/10.2139/ssrn.1744325","url":null,"abstract":"We provide a micro-based rationale for macroprudential capital regulation by developing a model in which bankers can privately undertake a costly effort and reduce the probability of adverse shocks to their asset holdings that force liquidation (deterioration risk). Low fundamental risk of assets guarantees benevolent funding conditions and banks are able to expand their balance sheets. The high continuation value would, in principle, improve incentives. However, the rise in asset demand and prices may jeopardize bankers' efforts whenever the liquidation price is high enough. This imposes socially inefficient liquidation which can be corrected with a capital requirement that aligns bankers' incentives. We show that a microprudential regulatory regime that disregards the equilibrium effect of asset prices on incentives performs poorly as low fundamental risk may induce high deterioration risk. Overall, the model suggests a theoretical foundation for the countercyclical capital buffer of Basel III, since it prescribes a macroprudential regulatory regime in which the equilibrium feedback effect is fully taken into account.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"64 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-01-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128752809","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
States and their representatives, national governments, play a key role in national telecommunication markets. As lawmakers, they determine the playing field of the agents in the markets and the decision powers of national regulators. Simultaneously, they are involved in appointing presidential chambers of national regulators. On the other hand, governments keep shares in regulated companies and support single infrastructure projects based on financial and legal state aid measures. Therefore, European Union regulatory frameworks require a strict separation of tasks between national ministries. However, the European Commission has repeatedly criticized member states for in-transparency and insufficient separations of tasks in national implementation. While the Second Regulatory Package balanced competition and investment aims, the new Regulatory Package implemented in December 2009 dedicates a higher weight to the role of infrastructure quality as a driver of service innovations. Moreover, national regulators become more independent, and former national regulation tasks are partially shifted to the pan-European level. In consequence, the role of governments also changes. I discuss the transposition process of Regulatory Packages to national laws and how they have been implemented on the national level to learn more about how the new Regulatory Package will affect the national situation and the European integration process.
{"title":"The National Regulatory Structure Against the Background of the European Regulatory System","authors":"Tobias Veith","doi":"10.2139/ssrn.1727452","DOIUrl":"https://doi.org/10.2139/ssrn.1727452","url":null,"abstract":"States and their representatives, national governments, play a key role in national telecommunication markets. As lawmakers, they determine the playing field of the agents in the markets and the decision powers of national regulators. Simultaneously, they are involved in appointing presidential chambers of national regulators. On the other hand, governments keep shares in regulated companies and support single infrastructure projects based on financial and legal state aid measures. Therefore, European Union regulatory frameworks require a strict separation of tasks between national ministries. However, the European Commission has repeatedly criticized member states for in-transparency and insufficient separations of tasks in national implementation. While the Second Regulatory Package balanced competition and investment aims, the new Regulatory Package implemented in December 2009 dedicates a higher weight to the role of infrastructure quality as a driver of service innovations. Moreover, national regulators become more independent, and former national regulation tasks are partially shifted to the pan-European level. In consequence, the role of governments also changes. I discuss the transposition process of Regulatory Packages to national laws and how they have been implemented on the national level to learn more about how the new Regulatory Package will affect the national situation and the European integration process.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"148 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132796902","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The concept of corruption is contested in some quarters, requiring an analysis of deep questions defining the relationship between state and society. This essay introduces these issues by confronting the seemingly disparate views of free market libertarians and of those ethnographers who study corruption as an aspect of state/society relations. Both are skeptical of the modern state and frequently see “corruption” as a superior alternative to abiding by the formal law. The essay than considers how free-marketeers and cultural ethnographers confront what is called ”grand corruption” - involving political leaders and multi-national firms. Here, corporate interests, that in other circumstances emphasize the value of the free market, characteristically invoke local cultural practices as an excuse for making payoffs. In contrast, scholars of local cultural practices invoke the predominance of economic incentives - that is, the greed and the profit motive of multi-national firms - to condemn grand corruption. After confronting these curious convergences and conceptual reversals, the essay presents the author’s own view. Call it the “democratic legitimacy” approach. It stresses the way pervasive corruption undermines the competence, fairness, and democratic legitimacy of the modern state. It substitutes the criteria of willingness-to-pay for criteria based on desert, need, efficiency, and other values. This approach leads to a suggested reform agenda consistent with the goal of strengthening state capacity and accountability.
{"title":"Corruption: Greed, Culture and the State","authors":"S. Rose-Ackerman","doi":"10.2139/SSRN.1648859","DOIUrl":"https://doi.org/10.2139/SSRN.1648859","url":null,"abstract":"The concept of corruption is contested in some quarters, requiring an analysis of deep questions defining the relationship between state and society. This essay introduces these issues by confronting the seemingly disparate views of free market libertarians and of those ethnographers who study corruption as an aspect of state/society relations. Both are skeptical of the modern state and frequently see “corruption” as a superior alternative to abiding by the formal law. The essay than considers how free-marketeers and cultural ethnographers confront what is called ”grand corruption” - involving political leaders and multi-national firms. Here, corporate interests, that in other circumstances emphasize the value of the free market, characteristically invoke local cultural practices as an excuse for making payoffs. In contrast, scholars of local cultural practices invoke the predominance of economic incentives - that is, the greed and the profit motive of multi-national firms - to condemn grand corruption. After confronting these curious convergences and conceptual reversals, the essay presents the author’s own view. Call it the “democratic legitimacy” approach. It stresses the way pervasive corruption undermines the competence, fairness, and democratic legitimacy of the modern state. It substitutes the criteria of willingness-to-pay for criteria based on desert, need, efficiency, and other values. This approach leads to a suggested reform agenda consistent with the goal of strengthening state capacity and accountability.","PeriodicalId":302242,"journal":{"name":"PSN: Regulation (Topic)","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129164847","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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