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Law enforcement under incomplete law: theory and evidence from financial market regulation

Pistor, Katharina and Xu, Cheng-Gang (2003) Law enforcement under incomplete law: theory and evidence from financial market regulation. 3788. Centre for Economic Policy Research, London, UK.

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Identification Number: 3788

Abstract

This Paper studies the design of lawmaking and law enforcement institutions based on the premise that law is inherently incomplete. Under incomplete law, law enforcement by courts may suffer from deterrence failure. As a potential remedy, a regulatory regime is introduced. The major functional difference between courts and regulators is that courts enforce law reactively, that is only once others have initiated law enforcement procedures, while regulators enforce law proactively, i.e. on their own initiative. We study optimal regime selection between a court and a regulatory regime and present evidence from the history of financial market regulation.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.cepr.org
Additional Information: © 2003 the authors
Subjects: K Law > K Law (General)
JEL classification: K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K40 - General
K - Law and Economics > K2 - Regulation and Business Law > K20 - General
N - Economic History > N2 - Financial Markets and Institutions > N20 - General, International, or Comparative
G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
Sets: Collections > Economists Online
Departments > Economics
Date Deposited: 05 Jun 2008 13:28
Last Modified: 01 Oct 2010 08:54
URI: http://eprints.lse.ac.uk/id/eprint/5413

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