Can Regulators Prevent Corporate Scandals? What 200 Years of History Tell Us

Are regulatory interventions in financial markets delayed reactions to market failures, or can regulators pre-empt corporate misbehavior? Given the high economic and social costs associated with corporate scandals, and the substantial resources countries dedicate to preventing such misconduct, the answer to this question is of utmost importance.

Anecdotal evidence suggests that regulatory activity has a strong reactive component. History offers several prominent examples: The British Joint Stock Companies Act of 1844 followed widespread business failures and bankruptcies, the U.S. Securities Act of 1933 and the Securities Exchange Act of 1934 are often seen as a reaction to the Great Depression … Read more