Known unknowns:How much financial misconduct is detected and deterred?


Have financial businesses changed their behaviour in the aftermath of global financial crisis? We address this question by introducing a new and more parsimonious method to quantify the level of financial misconduct and apply this to financial offences between 2004 and 2016. This exercise allows us to investigate whether Capture-Recapture methods can be deployed to handle problems of partial observability and how they compare to previous methods set out to achieve the same goal. In our two stage approach, first, we estimate the rate at which offending businesses are detected, then we look at how the number of detected offenders changed after 2010, and use these two layers of information to make inferences on the deterrent effect of financial regulation. Our results offer evidence that a drop in the number of detected offences post-global financial crisis was driven largely by improved deterrence.

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Divisions: College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
College of Business and Social Sciences > Aston Business School
College of Business and Social Sciences > Aston Business School > Centre for Personal Financial Wellbeing
Additional Information: © 2021, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
Uncontrolled Keywords: Misconduct behaviour,Misconduct risk,Regulatory punishments,Partial observability,Capture-Recapture,Deterrence
Publication ISSN: 1873-0612
Last Modified: 09 Apr 2024 07:23
Date Deposited: 22 Jul 2021 10:22
Full Text Link:
Related URLs: https://linking ... 042443121001074 (Publisher URL)
PURE Output Type: Article
Published Date: 2021-09-01
Published Online Date: 2021-07-21
Accepted Date: 2021-07-13
Authors: Ashton, John
Burnett, Tim (ORCID Profile 0000-0002-1579-2448)
Diaz-rainey, Ivan
Ormosi, Peter

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