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In this dissertation we investigate the effect of monetary policy and regulatory changes on asset pricing and investor behavior. In the first chapter, using unique data on over-the-counter bank stock prices and balance sheet information from 1940 to 1968, we find that the largest commercial bank stocks, ranked by market value or gross deposits, have significant lower risk-adjusted annual returns than do small sized bank stocks even after controlling for standard risk factors including size. This return difference can be attributed to the Banking Act of 1935. Failures of larger institutions tended to be resolved by purchase and assumption, which is preferred because it preserves the value of the going concern, while failures of smaller institutions tended to be resolved by payoff and liquidation. This policy is interpreted as an implicit bailout by the government for large banks and we find it is one of the first instances of preferential treatment for large banks. When examined during the period of 1926 to 1939, when there are no such guarantees, we do not find any significant risk-adjusted returns differences between banks of different sizes. In the second chapter we examine the relationship between deposit insurance and its effect on depositor behavior. Using two classes of depositors we ask how introduction of deposit insurance influenced depositor behavior using treatment-and-control estimation strategy. New York's commercial banks accepted two classes of deposits, preferred and regular deposits. If a bank failed, preferred depositors received complete repayment before regular depositors received any repayment. The preferred depositors would serve as the control group because they would be minimally affected by deposit insurance. Before deposit insurance, regular depositors reacted to news about banks' balance sheets much more than preferred depositors did. After deposit insurance, the behavior difference between regular and preferred depositors was reduced. This difference in differences indicates that deposit insurance reduced depositor monitoring.

Prices in Vancouver and Toronto housing markets are forcing a tightening of mortgage lending across Canada by the Office of the Superintendent of Financial Institutions (OSFI). This form of risk mitigation is carried out through increased stress testing of mortgage borrower income levels along with more strictly enforced loan-to-value requirements used to regulate lending practices by Federally Regulated Financial Institutions (FRFIs).The goal of the tightened mortgage lending is due to concerns surrounding the increasingly alarming debt problem as Canadian debt to income levels doubled in the past two decades, along with historical drops in Debt-Service ratios of Canadians during economic downturn. With Canadian debt to income levels at an all-time high, coupled with the facts that the current Canadian rates are higher than those of the US prior to the 2008 Financial Crisis, and the high level of mortgage debt that makes up the overall debt of Canadians, tightening of mortgage regulation is something that the Government deems necessary.Written in the format of a Memorandum to a Deputy Minister in the Federal Canadian Government, this paper examines and addresses key issues related to the increased mortgage regulation being carried out by OSFI and the Federal Government.

This paper explores how a particular form of regulation—prior ethical review of research—developed over time in a specific context, testing the claims of standard explanations for such change (which center on the role of exogenous shocks in the form of research scandals) against more recent theoretical approaches to institutional changes, which emphasize the role of gradual change. To makes its case, this paper draws on archival and interview material focusing on the research ethics review system in the UK National Health Service. Key insights center on the minimal role scandals play in shaping changes in this regulatory setting and how these depend upon the absence of a single coherent profession (and accompanying social contract) associated with biomedical research.

The specific characteristics of transport services and markets, including their importance in socioeconomic terms, are such that Regulatory Impact Analysis (RIA) is particularly likely to yield major benefits when applied to transport policy. However RIA in transport is not as widespread as in other sectors given the presence of some major barriers. This paper explains the aspects of a good practice RIA system for transport regulations. It describes the rationale and the benefits of RIA frameworks and provides advice on dealing with the practical realities of implementing RIA in the transport sector. It concludes with recommendations for governments seeking to implement RIA within their jurisdictions.

Abstract

The corporate and financial sectors are facing increasing regulation, however, many of the reforms to date have been criticized for being only partially successful.


This paper examines the approach used for the introduction of Financial Services Reform (FSR) for general insurers in Australia, which has received significant criticism.


It was found that the approach adopted by the regulator for implementation of FSR was largely administrative, with a focus on technical definitions and compliance by companies. However, the recognition of the diversity of stakeholders and the complexity of change involved in implementing FSR effectively was lacking.


Based on this research, it is argued that while efficient administration is necessary it is not sufficient for effective implementation of new regulations.


Change initiatives are also required for all stakeholders reinforced by appropriate incentives for regulators and companies, with measurable and relevant benefits for customers and the community.

Copyright © 2007 John Wiley & Sons, Ltd.