Libor Manipulation: Cui Bono?
Mendoza College of Business, University of Notre Dame
University of Notre Dame
Jens Carsten Jackwerth
University of Konstanz - Department of Economics
University of Lugano - Institute of Finance; Swiss Finance Institute
November 2, 2015
Recent banking scandals raised a question: Do we need stricter regulation or better enforcement of the existing regulations? We study this question using the events surrounding the manipulation of the London Interbank Offer Rate (Libor). We first document pervasive evidence consistent with banks misreporting Libor submissions to profit from Libor-related positions in the full sample 1999-2012. We then show that Libor manipulation was initially stronger for banks incorporated outside the U.S., where enforcement is historically weaker, and that it disappeared in the aftermath of Libor investigations. Our results suggest that improved enforcement can be effective in deterring financial market misconduct.
Number of Pages in PDF File: 52
Keywords: Libor, manipulation, financial market misconduct, enforcement
JEL Classification: G11, G12, K42
Date posted: October 18, 2013 ; Last revised: November 2, 2015
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