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The contribution of social norms to the global financial crisis : a systemic actor focused model and proposal for regulatory change

Authors
Publisher
Wiley-Blackwell Publishing Ltd,
Publication Date
Keywords
  • 150199 Accounting Auditing And Accountability Not Elsewhere Classified
  • Legal Effectiveness
  • Governmental Protection
  • Hard Versus Soft Law
Disciplines
  • Economics

Abstract

This is the author’s version of a work that was submitted/accepted for pub- lication in the following source: Nicholson, Gavin J., Kiel, Geoffrey C. , & Kiel-Chisholm, Scott D. (2011) The contribution of social norms to the global financial crisis : a systemic actor focused model and proposal for regulatory change. Corporate Gov- ernance : An International Review, 19(5), pp. 471-488. This file was downloaded from: http://eprints.qut.edu.au/46808/ c© Copyright 2011Wiley-Blackwell Publishing Ltd. Notice: Changes introduced as a result of publishing processes such as copy-editing and formatting may not be reflected in this document. For a definitive version of this work, please refer to the published source: http://dx.doi.org/10.1111/j.1467-8683.2011.00883.x 1 THE CONTRIBUTION OF SOCIAL NORMS TO THE GLOBAL FINANCIAL CRISIS: A SYSTEMIC ACTOR FOCUSED MODEL AND PROPOSAL FOR REGULATORY CHANGE GAVIN NICHOLSON GEOFFREY KIEL SCOTT KIEL-CHISHOLM 2 THE CONTRIBUTION OF SOCIAL NORMS TO THE GLOBAL FINANCIAL CRISIS: A SYSTEMIC ACTOR FOCUSED MODEL AND PROPOSAL FOR REGULATORY CHANGE Manuscript Type: Conceptual Research Question/Issue: Conventional regulatory reforms of the financial system focus on standard economic assumptions of self-interested, rational actors. The Global Financial Crisis (GFC) and similar financial failures highlight there are limits to this approach. Instead we use a norm-based (or soft law) perspective to examine how the systemic problems underlying the GFC lay not so much in neo-classical economic assumptions of self-interest, but in unchecked financial innovation exploited by norms of buyer beware and ratings agency reliance among market participants. Fueled by sector-wide remuneration practices, these norms created information asymmetries that fundamentally undermined the integrity of the market. Research Findings/Insights: We present a model that highlights how investment ban

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