Financial Market Misconduct and Public Enforcement: The Case of Libor Manipulation
Mendoza College of Business, University of Notre Dame
University of Notre Dame
Jens Carsten Jackwerth
University of Konstanz - Department of Economics
USI-Lugano; Ecole Polytechnique Fédérale de Lausanne - Swiss Finance Institute
February 10, 2016
What is the role of public enforcement in preventing widespread financial market misconduct? We study this question using the events surrounding the manipulation of the London Interbank Offer Rate (Libor). We find pervasive evidence consistent with banks misreporting Libor submissions to profit from Libor-related positions in the full sample 1999-2012. The evidence is initially stronger for banks incorporated outside the U.S., where enforcement is historically weaker, and it disappears in the aftermath of Libor investigations. Overall, our results suggest that improvements in public enforcement can be effective in deterring financial market misconduct.
Number of Pages in PDF File: 54
Keywords: Libor, manipulation, financial market misconduct, enforcement
JEL Classification: G11, G12, K42
Date posted: October 18, 2013 ; Last revised: February 11, 2016
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