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...

This paper explores the structure of SIVs and by exploring how they can be made off-balance-sheet but are being taken back on balance sheet under several conditions, illustrates the GAAP rules failed to capture the economic substance of certain financial transactions and associated implications...

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...