ERISA and ESG Investing

The Department of Labor (“DOL”), through its administration of the Employee Retirement Income Security Act of 1974 (ERISA), has a critical role to play in the regulation of employee pension benefit plans. Most importantly, the DOL is tasked with enforcing the fiduciary duties of ERISA plan managers (trustees who retain investment and voting authority or […]

Stranger than Fiction? Business Drives a New System of Climate Governance

This post is the latest in our special issue: “Climate Change and Financial Markets – Risk, Regulation, and Innovation.” To learn more about the special issue and the work of the Global Financial Markets Center around climate change and financial markets, please read the special issue’s introduction here. And to review all The FinReg Blog […]

Who saves our world? The impact of executives’ gender on corporate social and ecological investments

Introduction In August 2019, 181 members of the Business Roundtable, a nonprofit association whose members are chief executive officers of major U.S. companies, signed a “Statement on the Purpose of a Corporation,” which represents a rebuke from a strong shareholder orientation towards a more modern stakeholder capitalism. Two of the five pillars described in the […]

Macroprudential Capital Requirements with Non-Bank Finance

Excessive risk-taking in the financial sector contributed to the Global Financial Crisis of 2007-2009, leading many policymakers to consider tightening existing regulations or imposing new ones altogether. One such proposal is to tighten bank capital requirements, which have been a cornerstone of international financial regulation since the 1980s. At least part of capital requirements’ attractiveness […]

Do Firms Foresee Proprietary Cost of Mandatory Public Disclosures?

Regulation mandating public disclosures by firms does not come without cost. Surveying managers’ beliefs reveals that one of the most important costs is a perceived loss of competitive advantage arising from disclosing proprietary information (i.e., proprietary cost). Almost 60% of CFOs of firms in the United States are concerned that public disclosure regulation affects their […]

Rocking the Boat: How Relative Performance Evaluation Affects Corporate Risk Taking

Courtesy of Truc (Peter) Thuc Do, Huai Zhang, and Luo Zuo Relative Performance Evaluation (RPE) allows a firm to compensate its managers according to the firm’ performance relative to the performance of peer firms. A typical RPE contract has two distinct features. First, relative rather than absolute performance matters. Under an RPE contract, the CEO […]

The Resilience of French Companies to the COVID-19 Crisis

Courtesy of Alexandre Garel and Arthur Petit-Romec The COVID-19 outbreak has massively disrupted the life of individuals and imposed huge financial costs on almost all firms. As first diagnosed by Ramelli and Wagner (2020), on February 24, the U.S. stock market started to oscillate wildly and many firms saw much of their equity destroyed by […]

Do Directors Drive Corporate Sustainability?

Courtesy of Peter Iliev and Lukas Roth Climate change and providing equal opportunities are some of the biggest challenges the world faces in achieving a better and more sustainable future for all. In recent years, firms’ environmental and social sustainability policies have moved into the spotlight. Policymakers, investors, and special interest groups push firms to […]

Responsible Banking Should Not Remain Just a Global Slogan

Courtesy of Mete Feridun As the COVID-19 pandemic continues to threaten the global economy and financial markets, the global banking sector is approaching a tipping point for changing its overall culture and behaviour towards a more responsible banking model. This is because it is increasingly clear that recovery from the COVID-19 crisis will take longer […]

Beyond Board Duties: A Comparative Look at Monitoring, Risk Management & Compliance

Courtesy of Virginia Harper Ho* One of the most important functions of modern corporate boards is their risk oversight role, a responsibility that comes to the fore whenever corporate scandals emerge.  In most jurisdictions, risk oversight is enforced partly as a matter of fiduciary duty. But, as the COVID-19 pandemic has made clear, board monitoring […]