54 Pages Posted: 18 Oct 2013 Last revised: 11 Feb 2016
Date Written: 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.
Keywords: Libor, manipulation, financial market misconduct, enforcement
JEL Classification: G11, G12, K42
Suggested Citation: Suggested Citation
Gandhi, Priyank and Golez, Benjamin and Jackwerth, Jens Carsten and Plazzi, Alberto, Financial Market Misconduct and Public Enforcement: The Case of Libor Manipulation (February 10, 2016). Available at SSRN: https://ssrn.com/abstract=2342075 or http://dx.doi.org/10.2139/ssrn.2342075