Table of Contents

Quantified Cost-Benefit Analysis at the SEC

Joshua T. White, University of Georgia

A Carrot Without a Stick - Whistleblowing Rewards Under the Dodd-Frank Act

Benedikt Franke, University of Mannheim - Accounting and Taxation
Henrik Moser, University of Mannheim - Accounting and Taxation
Dirk Simons, University of Mannheim - Accounting and Taxation

Bank Enforcement Actions and the Terms of Lending

Yota Deli, Economic and Social Research Institute, Ireland
Manthos D. Delis, University of Surrey - Surrey Business School
Iftekhar Hasan, Gabelli School of Business, Fordham University, Bank of Finland
Liuling Liu, Bowling Green State University - College of Business Administration


REGULATION OF FINANCIAL INSTITUTIONS eJOURNAL

"Quantified Cost-Benefit Analysis at the SEC" Free Download
Administrative Law Review Accord, Forthcoming

JOSHUA T. WHITE, University of Georgia
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Following a number of high-profile judicial setbacks, the U.S. Securities and Exchange Commission (SEC) has devoted considerable resources towards enhancing its economic analyses in support of rulemaking activities. An ensuing discussion has emerged among academics, policymakers, and regulators concerning the SEC’s ongoing efforts to quantify the costs and benefits of its rules.

In their recent Article, Jeff Schwartz and Alexandra Nelson provide an important contribution to this conversation by critiquing the SEC’s quantification of the expected compliance costs for the Conflict Minerals Rule. They contend that the SEC produced a poorly constructed and inaccurate cost estimate that continues to misinform deliberations on supply chain transparency efforts, and advocate against forced quantification of costs and benefits in SEC rulemaking.

In my Response, I review criticisms levied in the Article about the SEC’s cost estimate for this rule, and the Commission’s overall efforts to integrate quantification into its economic analyses. I also discuss where the SEC’s economic analysis of the Conflict Minerals Rule followed and deviated from its own stated framework of best practices. Finally, I suggest pragmatic approaches to improve both the economic analysis of this rule and quantified cost-benefit analysis in general.

"A Carrot Without a Stick - Whistleblowing Rewards Under the Dodd-Frank Act" Free Download

BENEDIKT FRANKE, University of Mannheim - Accounting and Taxation
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HENRIK MOSER, University of Mannheim - Accounting and Taxation
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DIRK SIMONS, University of Mannheim - Accounting and Taxation
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The Dodd-Frank Act of 2010 marks a paradigm shift in the U.S. corporate whistleblowing legislation. Whistleblowers are entitled to monetary rewards if they provide information resulting in sanctions against an accused company. We analyze the impact of monetary rewards on the prevalence of whistleblowing and identify the equilibrium behavior of managers and employees induced by the regulation. Our model shows that, in order to be effective, monetary rewards need to be sufficiently high to compensate for retaliation damages. If monetary rewards fulfill this condition, they indeed foster whistleblowing while they do not guarantee lawful manager behavior. However, increasing monetary rewards can also have unintended consequences such as an increasing number of false accusations. Our results further highlight that regulators have to carefully weigh whistleblower rewards, protection from retaliation, and fines for uncovered manipulation to achieve an efficient whistleblower regime.

"Bank Enforcement Actions and the Terms of Lending" Free Download
Bank of Finland Research Discussion Paper No. 23/2016

YOTA DELI, Economic and Social Research Institute, Ireland
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MANTHOS D. DELIS, University of Surrey - Surrey Business School
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IFTEKHAR HASAN, Gabelli School of Business, Fordham University, Bank of Finland
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LIULING LIU, Bowling Green State University - College of Business Administration
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Formal enforcement actions issued against banks for violations of laws and regulations related to safety and soundness can theoretically have both positive and negative effects on the terms of lending. Using hand-collected data on such enforcement actions issued against U.S. banks, we show that they have a strong negative effect on price terms (loan spreads and fees) for corporate loans and a positive one on non-price terms (loan maturity, size, covenants, and collateral). The results also indicate that in the absence of enforcement actions, the cost of borrowing during the subprime crisis would have been much higher, while punished banks intensify use of collateral.

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BANKING & FINANCIAL INSTITUTIONS EJOURNALS

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Social Science Electronic Publishing (SSEP), Inc., Harvard Business School, National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI)
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Advisory Board

Regulation of Financial Institutions eJournal

EDWARD I. ALTMAN
Senior Advisor, Credit and Debt Markets Research Program, New York University (NYU) - Salomon Center, Max L. Heine Emeritus Professor of Finance, New York University (NYU) - Department of Finance

DENNIS R. CAPOZZA
Professor Emeritus, Ross School of Business, University of Michigan

DONALD CHEW
Morgan Stanley Investment Management

J. DAVID CUMMINS
Joseph E. Boettner Professor, Temple University - Risk Management & Insurance & Actuarial Science

DOUGLAS W. DIAMOND
Merton H. Miller Distinguished Service Professor of Finance, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)

EUGENE F. FAMA
Robert R. McCormick Distinguished Service Professor of Finance, University of Chicago - Finance

STEPHEN FIGLEWSKI
Professor of Finance, New York University - Stern School of Business

STUART I. GREENBAUM
Bank of America Professor of Managerial Leadership, Washington University in St. Louis - Olin Business School

MICHAEL C. JENSEN
Co-Founder, Chairman, Managing Director and Integrity Officer, Social Science Electronic Publishing (SSEP), Inc., Jesse Isidor Straus Professor of Business Administration, Emeritus, Harvard Business School, Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

JONATHAN M. KARPOFF
Washington Mutual Endowed Chair in Innovation Professor of Finance, University of Washington - Michael G. Foster School of Business

KENNETH LEHN
Professor of Business Administration, University of Pittsburgh - Finance Group

STANLEY R. PLISKA
University of Illinois at Chicago - Department of Finance

CHARLES I. PLOSSER
President, Federal Reserve Bank of Philadelphia, National Bureau of Economic Research (NBER)

KATHERINE SCHIPPER
Duke University - Fuqua School of Business

ALAN SCHWARTZ
Sterling Professor of Law, Yale Law School

G. WILLIAM SCHWERT
Distinguished University Professor of Finance and Statistics, University of Rochester - Simon Business School, National Bureau of Economic Research (NBER)

RENE M. STULZ
Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University (OSU) - Department of Finance, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

ROSS L. WATTS
Erwin H. Schell Professor of Management, Massachusetts Institute of Technology (MIT) - Sloan School of Management