Law, Institutions and Taxes: Optimal Regulation and the Financial Crisis
نویسندگان
چکیده
Calls for tighter regulation of financial innovations are gathering momentum in the wake of the financial crisis. In a setting where corporate innovation imposes positive and negative externalities, the social impact of corporations depends on the sharing rule between the owners of a corporation and the non-financial claimants. We examine the role of law, regulation and institutions in altering this sharing rule. We propose a framework where the social planner puts in place an umbrella of laws, organizational form choice and taxation within which private firms optimize without invasive regulation. Since the legal regime affects the extent to which corporate owners are held responsible for the negative externalities they impose, unlimited liability may discourage innovation in strong legal regimes. Limited liability, however, might be accompanied by excessive innovation. We highlight the role of the government in altering the sharing rule due to its claim through corporate taxation and investigate the relation between law and corporate taxation. We show that the equilibrium corporate tax rates are a decreasing function of legal effectiveness of the embedding economy. Finally, we present some supporting evidence using cross-country data on corporate tax rates and measures of legal effectiveness. * John is from the Stern School of Business, New York University; Nair is from Ada Investment Management and Senbet is from the University of Maryland. The authors thank William Allen, Mihir Desai, Stavros Panageas, Ravi Jagannathan and Bilge Yilmaz for comments and/or discussions. Please address correspondence to Kose John, Stern School of Business, New York University, 44 West 4 Street, New York, NY 10012. Phone: (212)998-0337 Fax: (212)995-4233. E-mail: [email protected]
منابع مشابه
Content analysis of policy documents in Iran's public libraries
Purpose: The purpose of this research is to determine the categories and issues that were considered by national policymakers in the field of public libraries of the Islamic Republic of Iran. This study seeks to identify those issues and problems for which policymakers have been trying to find solutions by analyzing the content of policy documents. Method: This research is a qualitative resear...
متن کاملRegulation of Financial System in Iran: A Comparative Evaluation
Regulation and supervision is the main prerequisite for the stability of financial systems. Financial supervision consists of four elements: supervisory rules and regulations, supervisory structure, supervisory performance, and independence of supervisory institutions. The recent international financial crisis has made many countries to restructure the regulation and supervision architecture of...
متن کاملSystemic Risk Evaluation of Banks and financial institutions applying Markov clustering method and centrality measures of risk
Systemic risk is the risk beared by an economic system because of a special organization. This means that a liquidity problem or a financial crisis in one company could trigger a chain of reactions that puts the whole market into trouble. This kind of risk was underestimated until 2008 financial crisis. Now federal regulations exist for controlling this risk of financial institutions. Among div...
متن کاملTapping the Power of Soda Taxes: A Call for Multidisciplinary Research and Broad-Based Advocacy Coalitions – A Response to the Recent Commentaries
متن کامل
Compensation for Moral Damages arising from Medical Treatments in Iranian and American Law
Medical errors included diagnostic error, medication error, surgical error and also infections associated healthcare can causes creation economic and moral damages to the patient. In the meantime, uncertainties about how to evaluate and compensate moral damage as a result of these mistakes, has forced different legal system to adopt different approaches. This article will try to examine, Irania...
متن کامل