Purpose – The purpose of this paper is to understand the incentive effects of existing compensation mechanisms in case of the bankruptcy of a financial institution. Design/methodology/approach – The paper uses insights of law and economics to predict the effects of compensation mechanisms on...

Financial supervisory failure is often mentioned as one of the causes for the recent financial crisis. A possible explanation of this failure can be found in the absence of adequate incentives for financial supervisors. In the literature, accountability is considered an important mechanism to...

Liability of financial regulators is a controversial topic in Europe. Some countries have statutory protections in place to protect their financial regulators from being sued, while other countries are submitting their financial regulators to normal liability rules. The main argument for...