How should one regulate a firm when its investment may cause a negative externality? In this paper we present a model on regulating a firm run by a manager and owned by a shareholder. The regulator can impose a penalty on the manager, the shareholder, or both. Our characterization of optimal...

Pyramid has been regarded as a means to create internal financial market and tunnel asset by the ultimate controller, however, in a financial system dominated by banking sector and most of bank loans go to state controlled firms and public firms, entrepreneurs may also try to get access to bank...

Using a Department of Justice policy intervention intended to increase individual responsibility of managers for corporate offenses (e.g., pollution) as a natural experiment, I find that firms with a high ex-ante probability of regulatory violations (“exposed firms”) suffer an abnormal...

This paper studies the impact of disclosure on short selling. Using a confidential dataset on shorts on stocks traded in the Dutch stock market including both short positions large enough to trigger public disclosure and positions not large enough, we find that the quality of shorts increases...