Financial Market Misconduct and Public Enforcement: The Case of Libor Manipulation

59 Pages Posted: 18 Oct 2013 Last revised: 4 Mar 2018

See all articles by Priyank Gandhi

Priyank Gandhi

Rutgers Business School, Newark and New Brunswick

Benjamin Golez

University of Notre Dame

Jens Carsten Jackwerth

University of Konstanz - Department of Economics

Alberto Plazzi

Swiss Finance Institute; USI Lugano

Date Written: September 14, 2017

Abstract

Using comprehensive data on London Interbank Offer Rate (Libor) submissions from 2001 through 2012, we document systematic evidence consistent with banks manipulating Libor to profit from Libor related positions and, to a degree, to signal their creditworthiness during the distressed times for banks. The evidence is initially stronger for banks that were eventually sanctioned by the regulators and disappears for all banks post-2010 in the aftermath of Libor investigations. Our findings suggest that public enforcement, with the threat of large penalties and the loss of reputation, can be effective in deterring financial market misconduct.

Keywords: Libor, manipulation, financial market misconduct, enforcement

JEL Classification: G11, G12, K42

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 (September 14, 2017). Swiss Finance Institute Research Paper No. 17-53. Available at SSRN: https://ssrn.com/abstract=2342075 or http://dx.doi.org/10.2139/ssrn.2342075

Priyank Gandhi

Rutgers Business School, Newark and New Brunswick ( email )

111 Washington Avenue
Newark, NJ 07102
United States

Benjamin Golez

University of Notre Dame ( email )

256 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
(574) 631-1458 (Phone)

HOME PAGE: http://business.nd.edu/BenGolez/

Jens Carsten Jackwerth (Contact Author)

University of Konstanz - Department of Economics ( email )

Universitaetsstr. 10
Konstanz, 78457
Germany
+497531882196 (Phone)
+497531883120 (Fax)

HOME PAGE: http://cms.uni-konstanz.de/wiwi/jackwerth/

Alberto Plazzi

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

USI Lugano ( email )

Via Buffi 13
CH-6900 Lugano
Switzerland

HOME PAGE: http://www.people.usi.ch/plazzia/

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