Chapter

Government Regulation and Corporate Governance

Roy C. Smith and Ingo Walter

in Governing the Modern Corporation

Published in print February 2006 | ISBN: 9780195171679
Published online September 2006 | e-ISBN: 9780199783618 | DOI: http://dx.doi.org/10.1093/0195171675.003.0009
 Government Regulation and Corporate Governance

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The US regulatory framework has evolved since the 1930s, aiming to protect investors from abuse and exploitation. However, this regulation could only restrict specific, identified transactions and practices. If not so restricted, a business practice was considered permissible. Every few years, a dynamic market environment will tend to produce new practices and transactions, and in time the regulatory machinery catches up and declares some of them impermissible. When a major episode of misconduct occurs, the regulatory machine accelerates and catches up quickly. When this happens, sudden and sometimes retroactive changes in the “ground rules” are declared that inevitably catch a number of practitioners off guard.

Keywords: government regulation; corporate governance; free market; Adam Smith

Chapter.  12364 words.  Illustrated.

Subjects: Microeconomics

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