The Effects of Regulatory Change on the Investment Professional

SUMMARY Using a “natural experiment” provided by a change in Canadian auditing standards requiring an emphasis of matter paragraph in the auditor's report (GC-EOM) when the financial statements include a going concern uncertainty disclosure (GC-FS), this paper examines the incremental investor reaction to the auditor's report over the related GC-FS. Conditioning on the linguistic severity of the GC-FS (weak and severe), we first document a negative price response to severe but not to weak GC-FS before the regulatory change. This implies that investors react to financial statement disclosures and account for their degree of interpretability in the absence of a GC-EOM. When the uncertainty disclosure is accompanied by a GC-EOM, we find incremental negative abnormal returns and lower abnormal trading volume only for weak GC-FS. Collectively, these findings imply that an emphasis of matter paragraph in the auditor's report can have incremental value to investors. JEL Classifications: M42; G12; G14. Data Availability: Data used are available from public sources identified in the study.

Download Full-text

The Politics and Practices of Central Clearing in OTC Derivatives Markets

10.1093/oso/9780190864576.003.0007 ◽

2018 ◽

Author(s):

Erin Lockwood

Keyword(s):

Financial Markets ◽

Unintended Consequences ◽

Regulatory Change ◽

Significant Shift ◽

Risk Modeling ◽

Risk Models ◽

Over The Counter ◽

Otc Derivatives ◽

Derivatives Markets ◽

Policy Shifts

This chapter focuses on the unintended consequences of the post-crisis mandate that over-the-counter (OTC) derivatives be cleared through centralized clearinghouses in an effort to reduce counterparty and systemic risk. Although central clearing has been widely implemented, it has reproduced many of the same characteristics of financial markets that contributed to the 2008 crisis: concentrated risk, moral hazard, and a reliance on faulty risk models. What accounts for the recalcitrance of the OTC derivatives market to a regulatory change? The chapter argues that focusing on the technologies and practices used to govern derivatives markets helps explain the absence of more radical regulatory policy shifts in derivatives regulation. Although there has been a significant shift in who regulates OTC markets, much less has changed at the level of the specific practices that govern these markets, and the chapter examines the continued reliance on netting, collateralization, and risk modeling within clearinghouses.

Download Full-text

Understanding decoupling in response to corporate governance reform pressures

Journal of Financial Regulation and Compliance ◽

10.1108/jfrc-04-2014-0019 ◽

2015 ◽

Vol 23 (4) ◽

pp. 369-382 ◽

Cited By ~ 3

Author(s):

Mario Krenn

Keyword(s):

Corporate Governance ◽

Design Methodology ◽

Good Governance ◽

Regulatory Change ◽

Compliance Monitoring ◽

Governance Reform ◽

Firm Level ◽

Content Type ◽

Good Corporate Governance ◽

Actual Use

Purpose – The purpose of this article is to explain under what circumstances firm-level adoption of codes of good corporate governance will more likely be superficial rather than substantive in nature. The article contains lessons for any agency or country that attempts to implement deep and lasting changes in corporate governance via codes of good corporate governance. Design/methodology/approach – The article reviews the literature on compliance with codes of good corporate governance and develops a conceptual model to explain why some firms that have formally adopted a code of good governance decouple this policy from its actual use. Findings – Decoupling in response to the issuance of codes of good corporate governance will be more attractive to firms and also more sustainable under the following conditions: firms’ compliance costs are relatively high firms’ costs of outright and visible non-compliance are relatively high and outsiders’ compliance monitoring costs are relatively high. Originality/value – The article contributes to the debate on compliance and convergence and provides policymakers with a conceptual framework for assessing the likelihood of successful regulatory change in corporate governance.

Download Full-text

Employment preservation and textile regulation in early modern England, 1550–1640

Journal of Institutional Economics ◽

10.1017/s1744137421000187 ◽

2021 ◽

pp. 1-15

Author(s):

John H. Gendron

Keyword(s):

Early Modern ◽

Recent Literature ◽

Institutional Structure ◽

Regulatory Change ◽

Barriers To Entry ◽

Glorious Revolution ◽

Structure Changes ◽

Local Officials ◽

The Glorious Revolution ◽

The Cost

Abstract Much agreement exists among economic historians that an institutional structure which allows for broad participation in a country's economy is conducive to growth. With respect to England's institutional structure, changes that followed the Glorious Revolution of 1688 are given pride of place in recent literature. This article contributes to this literature by highlighting and explaining regulatory change that removed barriers to entry into the country's most vital industry, textiles, in the years between 1550 and 1640. However, although economic historians have tended to explain England's growth-facilitating institutions as arising abruptly through political revolution that placed constraints on the Crown, this article will elucidate change that was protracted, accretive, peaceful, and came through royal institutions. More specifically, this article argues that restrictive regulations, which were widely supported, were removed because Crown and Council, in consultation with local officials, recognized that enforcement would come at the cost of the greater priority of employment preservation.

Download Full-text