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

54 Pages Posted: 18 Oct 2013 Last revised: 11 Feb 2016

Priyank Gandhi

Mendoza College of Business, University of Notre Dame

Benjamin Golez

University of Notre Dame

Jens Carsten Jackwerth

University of Konstanz - Department of Economics

Alberto Plazzi

USI-Lugano; Swiss Finance Institute

Date Written: February 10, 2016

Abstract

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

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

Priyank Gandhi

Mendoza College of Business, University of Notre Dame ( email )

253 Mendoza College of Business
Notre Dame, IN 46656
United States
5746313450 (Phone)

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

USI-Lugano ( email )

Via Buffi 13
CH-6900 Lugano
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

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