Mark Roe
Apple’s Cash-Flow Problem
CAMBRIDGE – I recently examined the problem of corporate short-termism from two nonstandard angles. One was that some short-termism is sensi…
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CAMBRIDGE – I recently examined the problem of corporate short-termism from two nonstandard angles. One was that some short-termism is sensi…
CHICAGO – From the standpoint of European stability, the Italian elections could not have delivered a worse outcome. Italy’s parliament is d…
CAMBRIDGE – In a recent commentary, I examined whether increasing pressure from more rapid stock trading is inducing corporate managers to o…
CHICAGO – Hardly a day goes by without a settlement between a bank and a US government agency or regulator. The latest one is between Bank o…
CAMBRIDGE – Economic trends are sometimes more closely related to one another than news reports make them seem. For example, one regularly e…
CHICAGO – Europe has been experiencing a period of calm after the storm since European Central Bank President Mario Draghi’s “whatever it ta…
CAMBRIDGE – The United States Securities and Exchange Commission (SEC) recently rejected proposed rules aimed at making money-market funds s…
CHICAGO – Since the late 1970’s, the academic diffusion of game theory has led macroeconomists to emphasize the importance of “commitment,” …
CAMBRIDGE – America’s long-controversial Glass-Steagall Act of 1933, which separated deposit-taking commercial banks from securities-trading…
CHICAGO – Since the United States Supreme Court’s “Citizens United” decision, which prohibited the government from restricting independent p…
Were over-compensated and unaccountable bosses to blame for the Great Recession? Are bankers and financial managers overpaid? Which reforms must be adopted to save capitalism – above all from its practitioners?
If there is one lesson to be learned (or re-learned) from the global economic crisis of 2008/2009, it is that bad rules produce bad outcomes. Indeed, at almost every turn in the financial meltdown, one found a tableau of perverse incentives: entrenched managers compensated for short-term gains rather than long-term performance; rampant moral hazard driving down lending standards; investment banks paying ratings agencies to assess their securities.
Which institutions, and the incentives associated with them, improve or impede the performance of firms, sectors, and economies, and why do minor policy changes sometimes produce major, sometimes unintended, consequences?
These are the questions that occupy Mark Roe, Professor of Law at Harvard Law School and Luigi Zingales, Professor of Entrepreneurship and Finance at the University of Chicago. Roe, the author of pathbreaking studies on the impact of politics on how companies are organized and governed around the world, is also a renowned expert on securities law and financial markets who brings a powerful historical sensibility to analyzing the role of finance in economic development. Zingales, recognized in 2003 as the best young European financial economist for his work in areas such as corporate organization and financing, co-developed the Financial Trust Index, which monitors confidence in the US financial system.
In their exclusive monthly series The Rules of the Game, Mark Roe and Luigi Zingales take readers into the high-stakes world of corporate control, shareholder rights, and governance institutions. It is in these trenches of capitalism that the Great Recession took shape, and in which measures to prevent its recurrence will succeed or fail.
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