Law Enforcement Under Incomplete Law: Theory and Evidence from Financial Market Regulation

46 Pages Posted: 23 Apr 2003

See all articles by Chenggang Xu

Chenggang Xu

University of Hong Kong

Katharina Pistor

Columbia University School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: November 2002

Abstract

This paper studies the design of lawmaking and law enforcement institutions based on the premise that law is inherently incomplete. Under incomplete law, law enforcement by courts may suffer from deterrence failure. As a potential remedy a regulatory regime is introduced. The major functional difference between courts and regulators is that courts enforce law reactively, that is only once others have initiated law enforcement procedures, while regulators enforce law proactively, i.e. on their own initiative. We study optimal regime selection between a court and a regulatory regime and present evidence from the history of financial market regulation.

JEL Classification: G2, K0, K2, N2, P1

Suggested Citation

Xu, Chenggang and Pistor, Katharina, Law Enforcement Under Incomplete Law: Theory and Evidence from Financial Market Regulation (November 2002). Columbia Law and Economic Working Paper No. 222. Available at SSRN: https://ssrn.com/abstract=396141 or http://dx.doi.org/10.2139/ssrn.396141

Chenggang Xu

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Katharina Pistor (Contact Author)

Columbia University School of Law ( email )

435 West 116th Street
New York, NY 10025
United States
212-854-0068 (Phone)
212-854-7946 (Fax)

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