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http://hdl.handle.net/2451/26712
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| Title: | CONFLICTS OF INTEREST AND MARKET DISCIPLINE AMONG FINANCIAL SERVICES FIRMS |
| Authors: | Walter, Ingo |
| Keywords: | Conflicts of interest
Financial regulation
Financial services
Banking |
| Issue Date: | Oct-2003 |
| Series/Report no.: | S-CG-03-04 |
| Abstract: | There has been substantial public and regulatory attention of late to
apparent exploitation of conflicts of interest involving financial
services firms based on financial market imperfections and asymmetric
information. This paper proposes a workable taxonomy of conflicts of
interest in financial services firms, and links it to the nature and
scope of activities conducted by such firms, including possible
compounding of interest-conflicts in multifunctional client
relationships. It lays out the conditions that either encourage or
constrain exploitation of conflicts of interest, focusing in particular
on the role of information asymmetries and market discipline, including
the shareholder-impact of litigation and regulatory initiatives.
External regulation and market discipline are viewed as both complements
and substitutes – market discipline can leverage the impact of
external regulatory sanctions, while improving its granularity though
detailed management initiatives applied under threat of market
discipline. At the same time, market discipline may help obviate the
need for some types of external control of conflict of interest
exploitation. JEL G21, G24, G28, L14. |
| URI: | http://hdl.handle.net/2451/26712 |
| Appears in Collections: | Corporate Governance
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