The FinReg Blog

Goodwill Capital, Relationship-specific Capital, and Corporate Sanctions: An Empirical Study of the Russian Invasion of Ukraine

Posted on June 30, 2022June 29, 2022 by Siu Kai Choy, Tat-Kei Lai and Kam-Ming Wan

Whether environmental, social, and governance (ESG) policies enhance shareholder value has been the subject of debate for decades. There are three views on ESG investments. The first view argues that ESG activities enhance shareholder value because they are productive investments in “reputation” or “goodwill” capital (hereafter as “goodwill capital” view). ESG activities reduce transaction costs […]

What Is Driving Western Firms to Leave Russia?

Posted on June 28, 2022June 28, 2022 by Anastassia Fedyk and Tetyana Balyuk

In February 2022, Russia started a full-scale invasion of Ukraine, an event that would shake the global order. The war has already resulted in severe damages to Ukraine – thousands of killed civilians, more than 14 million of people displaced, and over $100 billion in infrastructure damage alone. Yet, the consequences of the war are […]

De-Facto Financial Regulation in the Form of Corporate Criminal Liability for ESG is Coming

Posted on June 23, 2022June 19, 2022 by J.S. Nelson

Traditional financial regulation would take the form of legislation passed by Congress and then interpreted by agencies. We are not in that world anymore. Given Congressional paralysis, de-facto financial regulation is being pushed by the setting of agency agendas and being communicated to the business community through announcements of priorities and prosecutions. For example, despite […]

Are All ESG Funds Created Equal? Only Some Funds Are Committed

Posted on June 22, 2022June 19, 2022 by Michelle Lowry, Pingle Wang and Kelsey Wei

“The major problem that I have is that even if they’re [ESG funds] marketed correctly, they actually have no demonstrable impact.”1 Tariq Fancy, the former head of BlackRock’s sustainable investing Flows into ESG mutual funds have increased markedly over recent years, raising the question of whether these capital flows lead to improved ESG policies in […]

ESG as a Business Model for Small & Medium-Sized Enterprises

Posted on June 21, 2022June 29, 2022 by Mark Fenwick, Tronel Joubert, Sanita Van Wyk and Erik P. M. Vermeulen

As the world returns to something more recognizably normal, it seems natural to ask what the economy will look like after the pandemic. Will things ever go back to how they were, or are we facing a new – and altogether different – reality? Whenever a crisis – political, economic, or social – impacts […]

Corruption and Innovation in China

Posted on June 15, 2022June 19, 2022 by Xiangyu Shi

In the past four decades, China has been demonstrated miraculous growth records as well as rampant corruption, which presents a paradox for scholars: Is corruption is conducive to Chinese economic development? Some argue that corruption is “grease” in the economy and helps firms bypass inefficient regulation and red tape, while others believe that corruption exacerbates […]

Changes in Risk Factor Disclosures and the Variance Risk Premium

Posted on June 14, 2022June 14, 2022 by Mathew Lyle, Eddie Riedl and Federico Siano

Since 2005, the Securities and Exchange Commission (SEC) mandates that all publicly-traded firms inform investors about material risks that may impact future performance. These are referred to as risk factor disclosures, which are discussed within Item 1A of 10-K filings. These risk disclosures have been criticized as lengthy and boilerplate (IRRC 2016; SEC 2016); it […]

Regulator’s Use of Corporate Monitors to Remediate Financial Misconduct

Posted on June 8, 2022June 7, 2022 by Rebecca Files, Gerald S. Martin and Yan (Tricia) Sun

Regulators such as the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) are allowed to seek any remedy that is necessary to protect investors following violations of securities law. One remedy increasingly being used is the requirement that violating firms hire a corporate monitor at their own expense, who is charged with supervising […]

The Sustainability Arbitrage Problem and Regulation of Private Companies

Posted on June 7, 2022June 7, 2022 by Cem Veziroglu and Abdurrahman Kayiklik

The climate crisis presents a challenge of unprecedented scale for policymakers around the globe. Unsurprisingly, corporate governance has drawn considerable attention in this context from scholars and regulators alike. This has resulted in an abundance of policy proposals—some already implemented and others still being debated—to ensure that corporations play their part as the world transitions […]

Does Auditor Litigation Risk Affect Corporate Investments?

Posted on June 6, 2022June 2, 2022 by Kwabena Boasiako, Anthony Kyiu, Sylvester Adasi Manu and Bernard Tawiah

To what extent can the risk of litigation against auditors be beneficial or harmful to companies? Auditors play an important role in financial contracting by certifying the credibility and reliability of financial statements that third parties rely upon. Increased risk of liability claims against auditors by third parties could result in huge financial costs and […]