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Is limiting financial supervisory liability a way to prevent defensive conduct? The outcome of a European survey

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  • Robert J. Dijkstra

    (Tilburg University)

Abstract

One of the arguments frequently used to limit the liability of financial supervisory authorities is the idea that normal liability rules result in defensive conduct and, therefore, in ineffective financial supervision. The impact of tort law on financial supervisory authorities is, however, highly debated, and no overwhelming empirical evidence exists to support it. This article presents findings from an empirical study on financial supervisors in the member states of the European Union. Targeting senior financial supervisors, the survey presented a series of statements, asking respondents to state their opinions about the impact of financial supervisory liability. In summary, most of the respondents seem to classify the impact of financial supervisory liability as neutral or positive. At most, the evidence from the survey implies an arguably modest degree of deterrence. Because the survey found no significant differences between respondents who perceive the liability of their organization as limited and those who do not, it suggests that limiting financial supervisory liability does not have an impact on the behavior, or at least on the perceptions of the impact of financial supervisory liability, of financial supervisors. Therefore, the study calls into question the widely accepted argument of defensive conduct as a reason for limiting the liability of financial supervisory authorities.

Suggested Citation

  • Robert J. Dijkstra, 2017. "Is limiting financial supervisory liability a way to prevent defensive conduct? The outcome of a European survey," European Journal of Law and Economics, Springer, vol. 43(1), pages 59-81, February.
  • Handle: RePEc:kap:ejlwec:v:43:y:2017:i:1:d:10.1007_s10657-015-9484-1
    DOI: 10.1007/s10657-015-9484-1
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    References listed on IDEAS

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    1. Craswell, Richard & Calfee, John E, 1986. "Deterrence and Uncertain Legal Standards," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 279-303, Fall.
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    3. Eric A. Posner & Alan O. Sykes, 2007. "An Economic Analysis of State and Individual Responsibility Under International Law," American Law and Economics Review, American Law and Economics Association, vol. 9(1), pages 72-134.
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    More about this item

    Keywords

    Financial supervisory liability; Tort law; Deterrence; Empirical research; Defensive conduct;
    All these keywords.

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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