Professor Roberta Romano, Sterling Professor of Law, Yale Law School: ‘Are there Empirical Foundations for the Iron Law of Financial Regulation?’

We are very fortunate that in this presentation, Professor Roberta Romano, Sterling Professor of Law at Yale Law School, will be speaking to her paper ‘Are There Empirical Foundations for the Iron Law of Financial Regulation?’ (abstract below and on SSRN at http://dx.doi.org/10.2139/ssrn.4340042).

There will be time during the event for debate and discussion of these important and pressing issues for financial market regulation.

This is a Zoom event that will take place on Tuesday 6^th February, 1630-1800 London time. Please register using the link below, and the Zoom link will be emailed by return.

https://lse.zoom.us/meeting/register/tZAlcOyvrTooH9bwkwDLrh6LTNWFoa9n6mKz 

Event organiser: Professor Jo Braithwaite

This event is part of the LSE Law School Financial Market Infrastructure Project:  This series of seminars on the future of FMI, hosted by the LSE Law School, was established in 2020 by Professor Jo Braithwaite and Visiting Professor in Practice Dr David Murphy, in order to provide a forum for interdisciplinary discussion of the most pressing issues relating to this systemic part of the global financial markets.

Speaker Bio:

Professor Roberta Romano: Roberta Romano is Sterling Professor of Law at Yale Law School and Co-Director of the Yale Law School Center for the Study of Corporate Law. Her research has focused on state competition for corporate charters, the political economy of takeover regulation, shareholder litigation, institutional investor activism and the regulation of securities markets and financial instruments and institutions. Professor Romano is a fellow of the American Academy of Arts and Sciences and the European Corporate Governance Institute, a research associate of the National Bureau for Economic Research, a past President of the American Law and Economics Association and the Society for Empirical Legal Studies, and a past co-editor of the Journal of Law, Economics and Organization. She is a recipient of the 2020 Ronald H. Coase Medal of the American Law and Economics Association, which is awarded in recognition of major contributions to the field of law and economics and of William & Mary Law School’s Marshall- Wythe Medallion, which recognizes those who have demonstrated exceptional accomplishment in law. Professor Romano has received the Yale Law Women teaching award three times and is the author of The Genius of American Corporate Law (1993) and The Advantage of Competitive Federalism for Securities Regulation (2002), and editor of Foundations of Corporate Law, 2d ed. (2010).

Abstract:

This article provides empirical foundations for what I term the “iron law of financial regulation”: following financial crises, Congress invariably enacts legislation that markedly increases financial regulation, resulting in a regulatory ratchet in which new statutes are layered atop of existing laws, and new regulations are grafted onto existing ones, creating an increasingly complex and opaque regulatory regime that is likely to contain at least some inapt provisions. A key contention is that the shock to the economic system from a financial crisis results in legislation that is different in its impact on regulatory scope and extent from that of legislation enacted in noncrisis times. The article investigates empirically two foundational premises: 1) whether there is an association between financial crises and legislation; and 2) whether legislation enacted in the wake of crises differs from that enacted in noncrisis times as measured by content and regulatory effect. In a hierarchy of relative importance, the data indicate that crisis-driven statutes are more consequential for the heightening of regulation than noncrisis ones. Using proxies for regulation related to textual restrictions and complexity, crisis-driven financial legislation has significantly greater regulatory content, and is followed by significantly higher levels of regulation than noncrisis-driven legislation.