Monitor Reputation and Transparency

61 Pages Posted: 20 Nov 2020

See all articles by Ivan Marinovic

Ivan Marinovic

Graduate School of Business, Stanford University

Martin Szydlowski

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: September 21, 2020

Abstract

We study the disclosure policy of a regulator overseeing a monitor with reputation concerns. The monitor faces a manager, who chooses how much to manipulate based on the monitor’s reputation. Reputational incentives are strongest for intermediate reputations. Instead of providing transparency, the regulator’s disclosure policy aims to keep the monitor’ s reputation intermediate, even at the cost of diminished incentives. Beneficial schemes feature random delay. Commonly used ones, which feature immediate disclosure or fixed time delay, destroy reputational incentives. Surprisingly, the regulator discloses more aggressively when she has better enforcement tools.

Keywords: Monitoring, Regulatory Disclosure, Reputation, Bank Regulation, Auditing

JEL Classification: G21, G28, D82, D83

Suggested Citation

Marinovic, Ivan and Szydlowski, Martin, Monitor Reputation and Transparency (September 21, 2020). Stanford University Graduate School of Business Research Paper , Available at SSRN: https://ssrn.com/abstract=3703870 or http://dx.doi.org/10.2139/ssrn.3703870

Ivan Marinovic

Graduate School of Business, Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Martin Szydlowski (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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