This paper tests Becker's hypothesis from "Crime and Punishment" that a higher threat of legal enforcement deters financial misconduct. Using a dataset of financial advisor and bank misconduct, we examine the extent to which this type of misconduct is driven by the legal environment. State-level variation in legal enforcement from UDAP laws reveals that a more extensive scope of coverage increases the number of reported instances of financial misconduct.
However, following increased threat of punishment from punitive damages, reported misconduct drops, with effects amplified for larger advisors and stronger legal enforceability. Our paper explores a labor market channel in which firms are more aggressively firing financial advisors following misconduct.
Stefano Colonnello is Associate Professor of Economic Policy at the Department of Economics at Ca’ Foscari University of Venice, where he teaches Financial Economics and Macroeconomics. He graduated in Finance at Bocconi University and obtained a Ph.D. in Finance at the École Polytechnique Fédérale de Lausanne. His research interests span the area of financial economics, with a focus on corporate governance, financial institutions, law&finance, and macrofinance.
The seminar will be held in English.
Major information: Giulia Baschieri (giulia.baschieri@unibo.it)