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Regulatory competition and rules/principles-based regulation

Author

Listed:
  • Frantz, Pascal
  • Instefjord, Norvald

Abstract

This paper analyses how regulatory competition affects principles‐based and rules‐based systems of regulation. Competition between regulators creates the possibility of regulatory arbitrage that generates a race to the bottom by regulators that is socially harmful. We derive the welfare effects of such competition and the regulatory response to these effects, in particular, regulatory harmonisation. We find, however, that regulators can adopt harmful regulatory harmonisation. These effects can make coordination efforts in developing global regulation socially desirable. We demonstrate, moreover, that corporate lobbying is not always harmful: it can both encourage and discourage socially desirable regulation.

Suggested Citation

  • Frantz, Pascal & Instefjord, Norvald, 2018. "Regulatory competition and rules/principles-based regulation," LSE Research Online Documents on Economics 87301, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:87301
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    File URL: http://eprints.lse.ac.uk/87301/
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    References listed on IDEAS

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    Cited by:

    1. Jae Hwan Ahn, 2022. "The road not taken: A comparison of Accounting and Auditing Enforcement Releases and securities class actions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(9-10), pages 1489-1529, October.

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    More about this item

    Keywords

    corporate lobbying; principles based regulation; regulatory arbitrage; regulatory harmonization; rules based regulation;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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