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Co-operative and competitive enforced self regulation: the role of governments, private actors and banks in corporate responsibility

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  • Ojo, Marianne

Abstract

In considering why practices which stimulate incentives for private agents to exert corporate control should be encouraged, this paper highlights criticisms attributed to government control of banks. However the theory relating to the “helping hand” view of government is advanced as having a fundamental role in the regulation and supervision of banks. Furthermore, governments have a vital role to play in corporate responsibility and regulation given the fact that banks are costly and difficult to monitor – this being principally attributed to the possibility that private agents will lack required incentives or the ability to supervise banks. Through its supervision of banks, governments also assume an important role where matters related to the fostering of accountability are concerned – not only because banks may have the power to affect firm performance, but also because some private agents are not able to afford internal monitoring mechanisms. Through the Enforced Self Regulation model, the paper attempts to highlight the role played by government in the direct monitoring of firms. In proposing the Co-operative and Competitive Enforced Self Regulation model, it attempts to draw attention to the fact that although such a model is based on a combination of already existing models and theories, the absence of effective enforcement mechanisms will restrict the maximisation potential of such a model. The primary theme of the paper relates to how corporate responsibility and accountability could be fostered through monitoring and the involvement of governments in the regulation of firms. It illustrates how structures which operate in various systems, namely, stock market economies and universal banking systems, function (and attempt) to address gaps which may arise as a result of lack of adequate mechanisms of accountability. Furthermore it draws attention to the impact of asymmetric information (generally and in these systems), on levels of monitoring procedures and how conflicts of interests which could arise between banks and their shareholders, or between governments and those firms being regulated by the regulator, could be addressed.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22918.

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Date of creation: 27 May 2010
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Handle: RePEc:pra:mprapa:22918

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Keywords: accountability; asymmetric information; universal banking; regulation; regulatory capture; government;

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References

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  1. Gary Gorton & Frank A. Schmid, 1996. "Universal Banking and the Performance of German Firms," NBER Working Papers 5453, National Bureau of Economic Research, Inc.
  2. Miles, David, 1995. "Optimal regulation of deposit taking financial intermediaries," European Economic Review, Elsevier, Elsevier, vol. 39(7), pages 1365-1384, August.
  3. Roberta Romano, 2005. "Is Regulatory Competition a Problem or Irrelevant for Corporate Governance?," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 21(2), pages 212-231, Summer.
  4. Ojo, Marianne, 2010. "The impact of capital and disclosure requirements on risks and risk taking incentives," MPRA Paper 20404, University Library of Munich, Germany.
  5. Genschel, Philipp & Plümper, Thomas, 1997. "Regulatory competition and international cooperation," MPIfG Working Paper 97/4, Max Planck Institute for the Study of Societies.
  6. Richard A. Posner, 1974. "Theories of Economic Regulation," NBER Working Papers 0041, National Bureau of Economic Research, Inc.
  7. Jeremy Edwards & Marcus Nibler, 2000. "Corporate governance in Germany: the role of banks and ownership concentration," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 15(31), pages 237-267, October.
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Cited by:
  1. Senderski, Marcin, 2012. "Self-regulation as a remedy for market turmoil: An over-the-counter or a prescription drug?," MPRA Paper 51328, University Library of Munich, Germany.
  2. Ojo, Marianne, 2011. "Addressing the inadequacies of private law in the regulation of contracts – during and post contract formation periods," MPRA Paper 32282, University Library of Munich, Germany.

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