The issue of agency conflicts between shareholders and managers remains a prominent challenge. This struggle often manifests through rent extraction, where managers exploit opportunities for excess pay or insider trading profits. Scholars have explored various mechanisms to mitigate these conflicts, with one notable approach being the implementation of clawback provisions. This post delves into the… Read More »
In 2019, approximately 200 CEOs from the Business Roundtable made headlines by declaring a shift in corporate priorities. They asserted that companies should not focus solely on maximizing shareholder gains but should also consider the well-being of employees, environmental sustainability, and fair treatment of suppliers. Thus, a natural question arises: does this commitment to social… Read More »
Regulators face near-zero competition and exit threats. Thus, agency problems are more likely to occur when information asymmetry exists between regulators and constituents (Stiglitz 1999; Coffee 2007). If information asymmetry exacerbates moral hazard in the regulatory context, then the question is whether regulatory transparency can reduce moral hazard and improve regulator accountability. After all, regulators… Read More »
2021 saw a remarkable surge in the global market for corporate control, with a record number of 65,000 mergers and acquisitions (M&A). Among other factors, tax rules play an important role in shaping the probability and structure of M&A transactions. In 2008, the temporary suspension of limitations on tax loss transfers led to a substantial… Read More »
Regulation of behavioral science is coming. The Biden Administration has committed to tackling “junk fees” which emerge from deceptive, online behavioral design practices, as has the Federal Trade Commission. In the UK, the Competition and Markets Authority (CMA) is increasingly concerned with harms arising from ‘behavioral design’ and ‘choice architecture’. So too is the European… Read More »
In response to the escalating demand for sustainable investment options, the mutual fund industry is actively integrating sustainability into investment strategies and has introduced numerous financial products focused on sustainable investing. Consequently, mutual funds in capital markets can generally be categorized into two groups: self-identified ESG funds and non-ESG funds. Notably, over 70% of the… Read More »
At their current levels, sustainable investments are considerably below the levels needed to achieve decarbonization and the targets of the Paris Agreement. The World Economic Forum suggests that, to meet these goals, investments in nature-based solutions must quadruple by 2050, resulting in an annual investment exceeding $536 billion. Several strategies have been proposed, emphasizing the… Read More »
Fostering sustainability in financial and economic activity has become one of the key priorities of policymakers and regulators around the world. In this direction, the recently enacted Corporate Sustainability Reporting Directive (CSRD)1 is a cornerstone of the European Union’s policy to achieve a sustainable economy, environment, and society. Through greater disclosure and transparency, the CSRD… Read More »
In recent decades, there has been a marked increase in concerns about the adverse environmental impacts of corporate production activities. This heightened awareness stems from the growing threats posed by climate change, resource depletion, and ecological degradation. As companies continue to prioritize profit maximization and shareholder value, their toxic emissions have come under scrutiny. These… Read More »
Trading by politicians is increasingly scrutinized, with recent legislation prohibiting trading by politicians being introduced in Congress. There have been numerous scandals involving insider trading, such as trading prior to COVID lockdowns or trading ahead of government contract awards or FDA reports. Some politicians, however, claim that restrictions on their trading violates their economic freedom… Read More »
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