Found 553 article(s) in category 'Regulation'

The Trust Indenture Act of 1939 in Congress and the Courts in 2016: Bringing the SEC to the Table

The Trust Indenture Act of 1939 in Congress and the Courts in 2016: Bringing the SEC to the Table. Mark Roe, February 29, 2016, Paper. “This memo examines broad aspects of the recent controversies and ongoing litigation arising from the Trust Indenture Act’s requirement that no bondholder can see his or her payment terms change without the bondholder’s own consent. I outline here a path forward for a sensible legal structure governing out-of-bankruptcy restructurings of public bond issues. There are four points to be made.Link

Tags: ,

Why Investors Should Care About the Next Generation of Accounting Standards

Why Investors Should Care About the Next Generation of Accounting Standards. Robert Eccles, February 27, 2016, Opinion. “This is the mission of the Sustainability Accounting Standards Board, a nonprofit organization established by Jean Rogers in 2011. Michael Bloomberg, former New York mayor, is the current chair, and former Securities and Exchange Commission chair Mary Schapiro is SASB’s vice chair. SASB’s approach is a simple but powerful one. Through a rigorous process, it identifies the material ESG information that should be reported on a company’s Form 10-K, or equivalent reporting document for non-U.S.-listed companies, and the recommended key performance indicator or metric for each issue. The ESG issues are grouped into the following five categories: environment, social capital, human capital, business models and innovation, and leadership and governance.Link

Tags: , , ,

Who’s Right on US Financial Reform?

Who’s Right on US Financial Reform? Jeffrey Frankel, February 24, 2016, Opinion. “Eight years after triggering a crisis that nearly brought down the global financial system, the United States remains plagued by confusion about what reforms are needed to prevent it from happening again. As Americans prepare to choose their next president, a better understanding of the policy changes that would minimize the risk of future crises – and which politicians are most likely to implement them – is urgently needed.Link

Tags: , , , ,

Treasury’s Unfinished Work on Corporate Expatriations

Treasury’s Unfinished Work on Corporate Expatriations. Stephen Shay, February 22, 2016, Paper. “Continued tax-motivated inversions of U.S. corporations into foreign corporations highlight the systemic tax advantages that a foreign-owned U.S. corporation has over a U.S.-owned corporation in avoiding U.S. corporate tax on U.S. business income. In the absence of congressional action, this article emphasizes the need for the Treasury to further reduce U.S. tax incentives for inversions and other foreign acquisitions of U.S. corporations. The two most important of the tax incentives are earnings stripping and the ability to use, directly or indirectly, a U.S. group’s unrepatriated foreign earnings for the benefit of shareholders of the foreign parent corporation without incurring current U.S. income tax. These tax advantages will not be meaningfully reduced by any plausible lowering of the top U.S. corporate tax rate. Moreover, earnings stripping would be exacerbated by adoption of a territorial system.Link

Tags: , , , ,

Osborne Should Think Again on his Bank Surcharge

Osborne Should Think Again on his Bank Surcharge. Mark Roe, February 22, 2016, Opinion. “HSBC’s decision last week to keep its headquarters in London, after reports that it would leave the UK if the levy on bank liabilities were not lifted, will have been greeted with relief at the Treasury. However, there is good reason to think the Treasury got a bad deal, jeopardising financial safety for not very much in return.  In his Autumn Statement last year, Chancellor George Osborne promised to phase out the levy, offsetting this with an 8 per cent surcharge tax on bank profits. Taxing bank profits is popular with voters, even though it makes the financial system weaker. Because it makes bank equity more expensive and ending the levy makes debt cheaper, the surcharge will push British banks to use less safe equity and more risky debt.Link

Tags: , , ,

Distributional Equity in Climate Change Policy: Responsibility, Capacity, and Vulnerability

Distributional Equity in Climate Change Policy: Responsibility, Capacity, and Vulnerability. Dustin Tingley, February 3, 2016, Paper. “Bargaining over the allocation of costs to curb the effects of climate change has proven difficult, as evidenced by repeated failures to reach an international agreement. Sadly, the longer it takes to produce an agreement, the more likely it is that climate change will impose significant costs on all countries. We argue that a successful agreement will allocate costs to countries based on three dimensions of distributional equity: their capacity to pay to curb the effects of climate change, their vulnerability to the negative effects of climate change, and their responsibility for causing climate change.Link

Tags: , , ,

The Chief Risk Officer as Trojan Horse: How Sarbanes-Oxley Promoted the Abuse of Risky Derivatives

The Chief Risk Officer as Trojan Horse: How Sarbanes-Oxley Promoted the Abuse of Risky Derivatives. Frank Dobbin, 2016, Paper. “In the wake of the Enron, Worldcom, and Tyco scandals, Congress passed the Sarbanes-Oxley Act of 2002 to restrain corporate risk, malfeasance, and fraud. Many commercial banks responded by appointing chief risk officers to manage compliance. But risk managers entered their new positions with a professional agenda to maximize riskadjusted returns. The agenda, we predict, led chief risk officers to promote reliance on riskier derivatives. We also predict that others with the power to direct firm strategy responded by championing or restraining risk-taking, depending on their interests. Fund managers and CEOs with large, illiquid stakes in a bank restrained the chief risk officer, while CEOs dependent on bonuses endorsed riskier strategies. We test these ideas with data on 157 large commercial banks between 1995 and 2010. We contribute to institutional theory’s understanding of the professions in two ways …” Link

Tags: , , , ,

Restoring Rational Choice: The Challenge of Consumer Financial Regulation

Restoring Rational Choice: The Challenge of Consumer Financial Regulation. John Y. Campbell, February 2016, Paper. “This lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively. The lecture argues that financial ignorance is pervasive and unsurprising given the complexity of modern financial products, and that it contributes meaningfully to the evolution of wealth inequality. The lecture uses a stylized model to discuss the welfare economics of paternalistic intervention in financial markets, and discusses several specific examples including asset allocation in retirement savings, fees for unsecured short-term borrowing, and reverse mortgages.Link

Tags: , , ,

Options-Pricing Formula with Disaster Risk

Options-Pricing Formula with Disaster Risk. Robert Barro, January 2016, Paper. “A new options-pricing formula applies to far-out-of-the money put options on the overall stock market when disaster risk is the dominant force, the size distribution of disasters follows a power law, and the economy has a representative agent with Epstein-Zin utility. In the applicable region, the elasticity of the put-options price with respect to maturity is close to one. The elasticity with respect to exercise price is greater than one, roughly constant, and depends on the difference between the power-law tail parameter and the coefficient of relative risk aversion, γ.Link

Tags: , , , ,