Using a sample of all top management who were indicted for illegal insider trading in the United States for trades during the period 1989–2002, we explore the economic rationality of this white-collar crime. If this crime is an economically rational activity in the sense of Becker (1968), where a crime is committed if its expected benefits exceed its expected costs, “poorer” top management should be doing the most illegal insider trading. This is because the “poor” have less to lose (present value of foregone future compensation if caught is lower for them). We find in the data, however, that indictments are concentrated in the “richer” strata after we control for firm size, industry, firm growth opportunities, executive age, the opportunity to commit illegal insider trading, and the possibility that regulators target the “richer” strata. We thus rule out the economic motive for this white-collar crime, and leave open the possibility of other motives.
{"title":"Do They Do It For The Money?","authors":"Utpal Bhattacharya, C. Marshall","doi":"10.2139/ssrn.1356118","DOIUrl":"https://doi.org/10.2139/ssrn.1356118","url":null,"abstract":"Using a sample of all top management who were indicted for illegal insider trading in the United States for trades during the period 1989–2002, we explore the economic rationality of this white-collar crime. If this crime is an economically rational activity in the sense of Becker (1968), where a crime is committed if its expected benefits exceed its expected costs, “poorer” top management should be doing the most illegal insider trading. This is because the “poor” have less to lose (present value of foregone future compensation if caught is lower for them). We find in the data, however, that indictments are concentrated in the “richer” strata after we control for firm size, industry, firm growth opportunities, executive age, the opportunity to commit illegal insider trading, and the possibility that regulators target the “richer” strata. We thus rule out the economic motive for this white-collar crime, and leave open the possibility of other motives.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132808451","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 studies the ability of security-level contracts to substitute for poor country-level investor protections. Using a cross-country sample of restrictive covenants, we find that bond contacts are more likely to include covenants when creditor protection laws are weak. Further, the use of restrictive covenants in weak creditor protection countries is associated with a lower cost of debt. We also find that strong country-level shareholder rights are not necessarily harmful to bondholders. Overall, the findings suggest that issuers and investors can create international contracts that overcome some of the deficiencies of country-level investor protections and facilitate access to external finance. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.
{"title":"Do Country Level Investor Protections Impact Security Level Contract Design? Evidence from Foreign Bond Covenants","authors":"Darius P. Miller, Natalia Reisel","doi":"10.2139/ssrn.1392990","DOIUrl":"https://doi.org/10.2139/ssrn.1392990","url":null,"abstract":"This article studies the ability of security-level contracts to substitute for poor country-level investor protections. Using a cross-country sample of restrictive covenants, we find that bond contacts are more likely to include covenants when creditor protection laws are weak. Further, the use of restrictive covenants in weak creditor protection countries is associated with a lower cost of debt. We also find that strong country-level shareholder rights are not necessarily harmful to bondholders. Overall, the findings suggest that issuers and investors can create international contracts that overcome some of the deficiencies of country-level investor protections and facilitate access to external finance. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-05-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125560755","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 paper aims to explore the factors influencing the ability of firms to compete in globalised markets. The Austrian and evolutionary economics and the endogeneous growth literature highlight the role of innovation activities in enabling firms to compete more effectively - and expand their market share. On the basis of these theories, and using a large panel of firms from several Central and East European Countries (CEECs), this paper attempts to identify the factors and forces which determine the ability of firms to compete in conditions of transition. The competitiveness of firms, measured by their market share, is postulated to depend on indicators of firms' innovation behaviour such as improvements in cost-efficiency, labour productivity and investment in new machinery and equipment as well as characteristics of firms and their environment such as location, experience, technological intensity of their industries and the intensity of competition. To control for the dynamic nature of competitiveness and the potential endogeneity of its determinants, and to distinguish between short and long run effects of firm behaviour, a dynamic panel methodology is employed. The results indicate that the competitiveness of firms in transition economies is enhanced with improvements in their cost efficiency, productivity of labour, investment and their previous business experience while stronger competition has a negative impact on it.
{"title":"Innovation Activities and Competitiveness: Empirical Evidence on the Behaviour of Firms in the New EU Member States and Candidate Countries","authors":"N. Stojčić, Iraj Hashi, Shqiponja Telhaj","doi":"10.2139/ssrn.1825882","DOIUrl":"https://doi.org/10.2139/ssrn.1825882","url":null,"abstract":"This paper aims to explore the factors influencing the ability of firms to compete in globalised markets. The Austrian and evolutionary economics and the endogeneous growth literature highlight the role of innovation activities in enabling firms to compete more effectively - and expand their market share. On the basis of these theories, and using a large panel of firms from several Central and East European Countries (CEECs), this paper attempts to identify the factors and forces which determine the ability of firms to compete in conditions of transition. The competitiveness of firms, measured by their market share, is postulated to depend on indicators of firms' innovation behaviour such as improvements in cost-efficiency, labour productivity and investment in new machinery and equipment as well as characteristics of firms and their environment such as location, experience, technological intensity of their industries and the intensity of competition. To control for the dynamic nature of competitiveness and the potential endogeneity of its determinants, and to distinguish between short and long run effects of firm behaviour, a dynamic panel methodology is employed. The results indicate that the competitiveness of firms in transition economies is enhanced with improvements in their cost efficiency, productivity of labour, investment and their previous business experience while stronger competition has a negative impact on it.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116839450","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}
Section (hereafter ‘section’ or ‘s’) 172(1) of the CA 2006 requires a director of a company to act "in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole". A director is specifically required to have regard to a non-exhaustive range of factors in accordance with s.172(1)(a)–(f). These include in (d) ‘the impact of the company's operations on the community and the environment’. Section 417 of the Companies Act 2006 sets the requirement for one of the main components of the content of the directors' report, namely, the business review. It is a narrative report of the company's business to accompany the figures as shown in the annual accounts. According to section 417(2) the purpose of the business review is to inform members of the company and help them assess how the directors have performed their duty under section 172 (duty to promote the success of the company). However, whereas s. 172 refers to the impact of the company's operation on the community and the environment, s. 417(2) uses a different terminology (i.e. information about (i) environmental matters (including the impact of the company's business on the environment)). Is this intentional? what is the significance of this? This paper discusses how traditionally soft issues for companies have now become hard: hard to ignore, hard to manage and hard for companies that get them wrong. It inquires, amongst other things, into the above questions. The paper is structured as follows. Section B will outline changes in the corporate world, public policy and trends in public life generally with regard to ‘the environment’. Section C will then put these new developments into context by looking at the inclusion of the term ‘environment’ in the Companies Act 2006 (‘CA 2006’). It will also track back how and where has it been included, what is to be considered exactly in the context of the Directors’ report (the so-called ‘Business Review’ under section 417), and who is the intended audience – shareholders or the wider ‘public? Previous attempts to include/exclude environmental issues within the context of company law and directors’ duties will also be looked at. Section D will look at traditional interpretations and usage of the term ‘the environment’ and will raise the question whether it is possible to include such an intangible notion within the CA 2006? Section E will then return to the CA 2006 and discuss what does the term ‘environment’ means for the purposes of this legislation. For example, are there examples of analogous usage of the term within company law more widely? The purpose of Section F is to look at recent trends in corporate environmental disclosure and examine whether there has been a marked improvement in terms of quality and quantity. Initial indications as to how the new requirements in relation to reporting about environmental issues under the CA 2006 are implemented (or not) in practice wil
{"title":"Directors' Duties Under the UK Companies Act 2006 and the Impact of the Company's Operations on the Environment","authors":"I. Havercroft, A. Reisberg","doi":"10.2139/SSRN.1274567","DOIUrl":"https://doi.org/10.2139/SSRN.1274567","url":null,"abstract":"Section (hereafter ‘section’ or ‘s’) 172(1) of the CA 2006 requires a director of a company to act \"in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole\". A director is specifically required to have regard to a non-exhaustive range of factors in accordance with s.172(1)(a)–(f). These include in (d) ‘the impact of the company's operations on the community and the environment’. Section 417 of the Companies Act 2006 sets the requirement for one of the main components of the content of the directors' report, namely, the business review. It is a narrative report of the company's business to accompany the figures as shown in the annual accounts. According to section 417(2) the purpose of the business review is to inform members of the company and help them assess how the directors have performed their duty under section 172 (duty to promote the success of the company). However, whereas s. 172 refers to the impact of the company's operation on the community and the environment, s. 417(2) uses a different terminology (i.e. information about (i) environmental matters (including the impact of the company's business on the environment)). Is this intentional? what is the significance of this? This paper discusses how traditionally soft issues for companies have now become hard: hard to ignore, hard to manage and hard for companies that get them wrong. It inquires, amongst other things, into the above questions. The paper is structured as follows. Section B will outline changes in the corporate world, public policy and trends in public life generally with regard to ‘the environment’. Section C will then put these new developments into context by looking at the inclusion of the term ‘environment’ in the Companies Act 2006 (‘CA 2006’). It will also track back how and where has it been included, what is to be considered exactly in the context of the Directors’ report (the so-called ‘Business Review’ under section 417), and who is the intended audience – shareholders or the wider ‘public? Previous attempts to include/exclude environmental issues within the context of company law and directors’ duties will also be looked at. Section D will look at traditional interpretations and usage of the term ‘the environment’ and will raise the question whether it is possible to include such an intangible notion within the CA 2006? Section E will then return to the CA 2006 and discuss what does the term ‘environment’ means for the purposes of this legislation. For example, are there examples of analogous usage of the term within company law more widely? The purpose of Section F is to look at recent trends in corporate environmental disclosure and examine whether there has been a marked improvement in terms of quality and quantity. Initial indications as to how the new requirements in relation to reporting about environmental issues under the CA 2006 are implemented (or not) in practice wil","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114794108","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 paper provides new evidence on the effect of compensation consultants on CEO pay. We show that the use of a compensation consultant has an increasing effect on the level of total CEO compensation, which is consistent with the “ratcheting up” effect of consultants on CEO pay argued by the managerial power approach. However, we also find that this influence on pay levels mainly stems from an increase in equity based compensation. In contrast, we report a negative influence of consultants on basic (cash) pay.We also show that economic determinants, rather than CEO power, explain the decision to hire compensation consultants. The results are robust to several model specifications, different controls for firm and governance characteristics and tests for selection bias. Overall, we offer new evidence suggesting that pay consultants contribute to the solution of the executive pay determination problem and are not part of the problem; our results cast doubts on the conclusions of the managerial power approach regarding the role of compensation consultants.
{"title":"Compensation Consultants and CEO Pay: UK Evidence","authors":"G. Voulgaris, K. Stathopoulos, M. Walker","doi":"10.2139/ssrn.1501186","DOIUrl":"https://doi.org/10.2139/ssrn.1501186","url":null,"abstract":"This paper provides new evidence on the effect of compensation consultants on CEO pay. We show that the use of a compensation consultant has an increasing effect on the level of total CEO compensation, which is consistent with the “ratcheting up” effect of consultants on CEO pay argued by the managerial power approach. However, we also find that this influence on pay levels mainly stems from an increase in equity based compensation. In contrast, we report a negative influence of consultants on basic (cash) pay.We also show that economic determinants, rather than CEO power, explain the decision to hire compensation consultants. The results are robust to several model specifications, different controls for firm and governance characteristics and tests for selection bias. Overall, we offer new evidence suggesting that pay consultants contribute to the solution of the executive pay determination problem and are not part of the problem; our results cast doubts on the conclusions of the managerial power approach regarding the role of compensation consultants.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115768458","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}
Corporate governance law in the United States played a central role in the subprime debacle. Specifically, CEOs exercised sufficient autonomy to garner huge compensation payments based upon illusory income. Instead of profits, firms absorbed huge risks. The economic losses arising from this misconduct total trillions of dollars. This article seeks to reconfigure CEO autonomy in the public firm based upon the best extant empirical evidence regarding the optimal contours of CEO autonomy. This vision of optimal autonomy is then viewed through the lens of the subprime catastrophe. The article articulates the political dynamics that have led to suboptimal contours for CEO autonomy. In light of this evidence, the article proposes three specific mechanisms for curtailing autonomy pursuant to federal law: a mandatory and independent risk management committee; a mandatory and independent Qualified Legal Compliance Committee, with enhanced attributes; and, a new mechanism for contested corporate board elections. These mechanisms seek to vindicate CEO autonomy over the public firm's operations while expanding the monitoring functions of the board.
{"title":"Lessons from the Subprime Debacle: Stress Testing CEO Autonomy","authors":"S. Ramirez","doi":"10.2139/SSRN.1364146","DOIUrl":"https://doi.org/10.2139/SSRN.1364146","url":null,"abstract":"Corporate governance law in the United States played a central role in the subprime debacle. Specifically, CEOs exercised sufficient autonomy to garner huge compensation payments based upon illusory income. Instead of profits, firms absorbed huge risks. The economic losses arising from this misconduct total trillions of dollars. This article seeks to reconfigure CEO autonomy in the public firm based upon the best extant empirical evidence regarding the optimal contours of CEO autonomy. This vision of optimal autonomy is then viewed through the lens of the subprime catastrophe. The article articulates the political dynamics that have led to suboptimal contours for CEO autonomy. In light of this evidence, the article proposes three specific mechanisms for curtailing autonomy pursuant to federal law: a mandatory and independent risk management committee; a mandatory and independent Qualified Legal Compliance Committee, with enhanced attributes; and, a new mechanism for contested corporate board elections. These mechanisms seek to vindicate CEO autonomy over the public firm's operations while expanding the monitoring functions of the board.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115447053","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 review the basic information requirements for compliance with the Sarbanes-Oxley Act (SOX) and the OECD’s Principles of Corporate Governance (CG). The fundamental proposition of the paper is that information flow is a critical factor for the CG success or failure and information flow is dependent on the information system that the firm is using. The flaw is not the technology itself but in Enterprise Systems’ design. This analysis reveals that corporate governance principles cannot be implemented without the implementation of modern enterprise systems that can secure disclosure and transparency. Information dissemination and information control are essential to comply with SOX and OECD principles.
{"title":"Enterprise Systems and Corporate Governance: Parallel and Interconnected Evolution","authors":"T. Lazarides, M. Argyropoulou, D. Koufopoulos","doi":"10.2139/ssrn.1417588","DOIUrl":"https://doi.org/10.2139/ssrn.1417588","url":null,"abstract":"We review the basic information requirements for compliance with the Sarbanes-Oxley Act (SOX) and the OECD’s Principles of Corporate Governance (CG). The fundamental proposition of the paper is that information flow is a critical factor for the CG success or failure and information flow is dependent on the information system that the firm is using. The flaw is not the technology itself but in Enterprise Systems’ design. This analysis reveals that corporate governance principles cannot be implemented without the implementation of modern enterprise systems that can secure disclosure and transparency. Information dissemination and information control are essential to comply with SOX and OECD principles.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"83 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-06-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124608607","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 Article, I contend that directors who purposely refuse to consider corporate social responsibility and related practices, the social return on investment, or the double bottom line could be found potentially liable for breach of good faith under the standard recently articulated by the Delaware Supreme Court. Moreover, it may be a material misstatement and therefore actionable if a corporation makes a false statement claiming to be socially responsible.I introduce an entirely new and original way to define CSR under the “Creative Capitalism Spectrum,” providing guidance about whether a company can legitimately claim to be socially responsible. Recent scholarship has been devoted to redefining CSR, but it fails to take into account the legal implications of making public statements about CSR. The Creative Capitalism Spectrum provides directors with objective guidelines based on legal principles to corroborate a public statement of a corporation’s social responsibility. The Article distinguishes the concept of social entrepreneurship from other forms of CSR, and insists that full compliance with laws affecting social issues is a precondition to a claim of social responsibility. The Article confronts the growing problem of “greenwashing,” a term rapidly becoming a buzzword to describe companies who purport to employ environmentally responsible practices but fall short. Furthermore, I introduce a five-factor test boards can use to determine whether CSR projects or policies are justifiable uses of corporate resources. The five factors were pulled from various sources and reorganized to form the anagram PRISM: Potential, Relevance, Impact, Suitability, and Morale. This PRISM test should serve as guidance to directors and courts, especially as boards come under fire for engaging in CSR projects that ultimately do not prove to be financially beneficial to stockholders. Directors seeking protection under the Business Judgment Rule need the PRISM test to serve as an objective standard to demonstrate that they acted in a reasonably informed manner, in good faith, and that their decisions did not violate their fiduciary duty of due care.
{"title":"The Creative Capitalism Spectrum: Evaluating Corporate Social Responsibility Through a Legal Lens Abstract","authors":"J. Kerr","doi":"10.2139/SSRN.1501269","DOIUrl":"https://doi.org/10.2139/SSRN.1501269","url":null,"abstract":"In this Article, I contend that directors who purposely refuse to consider corporate social responsibility and related practices, the social return on investment, or the double bottom line could be found potentially liable for breach of good faith under the standard recently articulated by the Delaware Supreme Court. Moreover, it may be a material misstatement and therefore actionable if a corporation makes a false statement claiming to be socially responsible.I introduce an entirely new and original way to define CSR under the “Creative Capitalism Spectrum,” providing guidance about whether a company can legitimately claim to be socially responsible. Recent scholarship has been devoted to redefining CSR, but it fails to take into account the legal implications of making public statements about CSR. The Creative Capitalism Spectrum provides directors with objective guidelines based on legal principles to corroborate a public statement of a corporation’s social responsibility. The Article distinguishes the concept of social entrepreneurship from other forms of CSR, and insists that full compliance with laws affecting social issues is a precondition to a claim of social responsibility. The Article confronts the growing problem of “greenwashing,” a term rapidly becoming a buzzword to describe companies who purport to employ environmentally responsible practices but fall short. Furthermore, I introduce a five-factor test boards can use to determine whether CSR projects or policies are justifiable uses of corporate resources. The five factors were pulled from various sources and reorganized to form the anagram PRISM: Potential, Relevance, Impact, Suitability, and Morale. This PRISM test should serve as guidance to directors and courts, especially as boards come under fire for engaging in CSR projects that ultimately do not prove to be financially beneficial to stockholders. Directors seeking protection under the Business Judgment Rule need the PRISM test to serve as an objective standard to demonstrate that they acted in a reasonably informed manner, in good faith, and that their decisions did not violate their fiduciary duty of due care.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"252 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122506577","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 literature on regulation theory asserts that regulators are best able to encourage compliance when they are armed with a wide range of sanctions otherwise to compel compliance. It has been argued that the enactment of a wide range of sanctions and the use of those sanctions by a regulator should deter future contraventions of the law and lead to greater compliance. This paper discusses the early findings of a research project that tests some of the assumptions of regulatory theory in the corporate law context. The questions to be examined in the research project are whether or not there is a correspondence between the introduction of an enforcement regime and an increase in the level of compliance with the law which is being enforced, and whether or not there is a correspondence between enforcement activity by a regulator and an increase in the level of compliance with the law which is being enforced. This project aims to test these assumptions in the context of ASIC’s enforcement of the continuous disclosure provisions contained in Corporations Act 2001 (Cth) s 674(2). That provision requires listed disclosing entities to comply with the continuous disclosure obligation contained in ASX Listing Rule 3.1. Subject to certain exceptions, ASX Listing Rule 3.1 states that ‘[o]nce an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information.’ If an alleged contravention of Corporations Act 2001 (Cth) s 674(2) occurs, the Australian Securities and Investments Commission (ASIC) can instigate enforcement action under the criminal, civil penalty or administrative penalty regimes. These regimes were introduced in 1994, 2003 and 2004 respectively. This project will examine data on the disclosure of information to the ASX to determine whether or not the enactment of the different enforcement regimes, and the use of those regimes by ASIC, corresponded with an increase in the level of compliance with the continuous disclosure requirements by disclosing entities. This research project is in its initial stages. Funding for the data collection was obtained in 2008. At the date of writing this paper the data collection had not been completed. The paper sets out the research questions which will be examined, the theory underpinning the project, the reasons for the choice of the continuous disclosure regime, the methodology to be employed, some limitations of the study and some preliminary analysis of the data collected to date.
{"title":"Continuous Disclosure: Testing the Correspondence between State Enforcement and Compliance","authors":"M. Welsh","doi":"10.2139/ssrn.1413485","DOIUrl":"https://doi.org/10.2139/ssrn.1413485","url":null,"abstract":"The literature on regulation theory asserts that regulators are best able to encourage compliance when they are armed with a wide range of sanctions otherwise to compel compliance. It has been argued that the enactment of a wide range of sanctions and the use of those sanctions by a regulator should deter future contraventions of the law and lead to greater compliance. This paper discusses the early findings of a research project that tests some of the assumptions of regulatory theory in the corporate law context. The questions to be examined in the research project are whether or not there is a correspondence between the introduction of an enforcement regime and an increase in the level of compliance with the law which is being enforced, and whether or not there is a correspondence between enforcement activity by a regulator and an increase in the level of compliance with the law which is being enforced. This project aims to test these assumptions in the context of ASIC’s enforcement of the continuous disclosure provisions contained in Corporations Act 2001 (Cth) s 674(2). That provision requires listed disclosing entities to comply with the continuous disclosure obligation contained in ASX Listing Rule 3.1. Subject to certain exceptions, ASX Listing Rule 3.1 states that ‘[o]nce an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information.’ If an alleged contravention of Corporations Act 2001 (Cth) s 674(2) occurs, the Australian Securities and Investments Commission (ASIC) can instigate enforcement action under the criminal, civil penalty or administrative penalty regimes. These regimes were introduced in 1994, 2003 and 2004 respectively. This project will examine data on the disclosure of information to the ASX to determine whether or not the enactment of the different enforcement regimes, and the use of those regimes by ASIC, corresponded with an increase in the level of compliance with the continuous disclosure requirements by disclosing entities. This research project is in its initial stages. Funding for the data collection was obtained in 2008. At the date of writing this paper the data collection had not been completed. The paper sets out the research questions which will be examined, the theory underpinning the project, the reasons for the choice of the continuous disclosure regime, the methodology to be employed, some limitations of the study and some preliminary analysis of the data collected to date.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"269 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116308271","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}
Pub Date : 2009-03-13DOI: 10.1111/J.1468-0327.2009.00232.X
H. Hau, M. Thum
"We examine evidence for a systematic underperformance of Germany's state-owned banks in the current financial crisis and study if the bank losses can be traced to the quality of bank governance. For this purpose, we examine the biographical background of 592 supervisory board members in the 29 largest banks and find a pronounced difference in the finance and management experience of board representatives across private and state-owned banks. Measures of 'boardroom competence' are then related directly to the magnitude of bank losses in the recent financial crisis. Our data confirm that supervisory board (in-)competence in finance is related to losses in the financial crisis. Improved bank governance is therefore a suitable policy objective to reduce bank fragility." Copyright (c) CEPR, CES, MSH, 2009.
{"title":"Subprime Crisis and Board (In-)Competence: Private vs. Public Banks in Germany","authors":"H. Hau, M. Thum","doi":"10.1111/J.1468-0327.2009.00232.X","DOIUrl":"https://doi.org/10.1111/J.1468-0327.2009.00232.X","url":null,"abstract":"\"We examine evidence for a systematic underperformance of Germany's state-owned banks in the current financial crisis and study if the bank losses can be traced to the quality of bank governance. For this purpose, we examine the biographical background of 592 supervisory board members in the 29 largest banks and find a pronounced difference in the finance and management experience of board representatives across private and state-owned banks. Measures of 'boardroom competence' are then related directly to the magnitude of bank losses in the recent financial crisis. Our data confirm that supervisory board (in-)competence in finance is related to losses in the financial crisis. Improved bank governance is therefore a suitable policy objective to reduce bank fragility.\" Copyright (c) CEPR, CES, MSH, 2009.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-03-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131257475","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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