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Regulators can adjust penalties to compensate for incomplete monitoring of regulated parties that are subject to legal rules, but compensating penalty adjustments often are unavailable when regulated parties are subject to legal standards. Incomplete monitoring consequently invites greater noncompliance under standards than under rules. This chapter develops a model that quantifies some of the specific tradeoffs that regulators face in designing standards regimes under incomplete monitoring. The model also considers the extent to which suboptimal compliance due to incomplete monitoring is likely to result in deadweight loss in different settings.

The authors seek to understand the formation of control- and security-related identities among organizational employees through and interpretive narrative analysis. The authors also seek to identify how the identities form over time and across contexts. Several identities are identified as well as the changes that may occur in the identities.

Few interpretive or critical studies exist in behavioral information security research to represent employee perspectives of power and control. Using qualitative interviews and narrative analysis of the interview transcripts, this paper analyzes the security- and control-related identities and values that employees adopt in organizational settings.

Two major categories of behavioral security compliance identities were identified: compliant and noncompliant. Specific identities within the compliant category included: faithful follower vs the reasoned follower, and other-preserving versus the self-preserving identities. The noncompliant category included: anti-authority identity, utilitarian identity, trusting identity and unaware identity. Furthermore, three patterns of identity changes were observed.

The authors’ narrative stories suggest that employee identities are complex and multi-faceted, and that they may be fluid and adaptive to situational factors. Future research should avoid assumptions that all employees are the same or that employee beliefs remain constant over time or in different contexts. Identities are also strongly rooted in individuals' rearing and other life experiences. Thus, security control is far broader than is studied in behavioral studies. The authors find that history matters and should be examined carefully.

The authors’ study provides insights that managers can use to enhance security initiatives. It is clear that different employees build different control-related identities. Managers must understand that their employees are unique and will not all respond to policies, punishments, and other forms of control in the same way. The narratives also suggest that many organizations lack appropriate programs to enhance employees' awareness of security issues.

The authors’ narrative analysis suggests that employee security identities are complex and multi-faceted, and that they are fluid and adaptive to situational factors. Research should avoid assumptions that all employees are the same or that their beliefs remain constant over time or in different contexts. Identities are also strongly rooted in individuals' rearing and other life experiences. Their history matters and should be examined carefully.

This paper aims to examine whether the opportunistic use of assets securitization for earnings management is systematically widespread. It is hypothesized that with the passage of the Sarbanes–Oxley (SOX) Act of 2002, which imposed more stringent governance over the financial reporting process, there should be a decrease in the opportunistic use of securitization among firms that were not compliant prior to the passage.

The author use the SOX Act as an exogenous shock to determine whether the act had the intended effect of mitigating opportunistic securitization.

The empirical results show that there was a significant decrease in securitization among the non-compliant firms relative to the compliant firms and this reduction is related to firms using securitization opportunistically. This evidence suggests that securitization for earnings management was a systematic phenomenon and that SOX was effective in mitigating such behavior.

The contribution of this paper to the literature is twofold. It will identify changes in the use of asset securitization for earnings management purpose by using the exogenous variation in the strength of external governance. Furthermore, it will provide additional evidence of the effectiveness of financial regulations and have potential implications at the policy maker level.

The purpose of this study is to comparatively analyze the effect of dividend policy on shareholders’ wealth in Shariah-compliant (SC) and noncompliant (NC) nonfinancial firms in Pakistan.

All the nonfinancial firms listed on the Pakistan stock exchange have been taken as a sample for 2016–2021. The Karachi Meezan index screening criteria were applied to screen SC firms. Based on the BPLM and Hausman test results, the authors used the fixed-effect and pooled OLS model for SC and NC firms, respectively. The F-test was used to compare the effect of each dividend policy variable on shareholders’ wealth for both firm types.

The findings reveal that the dividend policy does affect the shareholders’ wealth in both firm types. Dividend per share (DPS), dividend yield (DY) and earnings per share significantly affect the shareholders’ wealth in SC firms. For NC firms, the dividend payout, DPS and DY are critical. Moreover, the F-test results show that the DPS, DY and leverage effect on the shareholders’ wealth significantly differ for both firm types.

This study fills the research gap in the Pakistani context specifically as well as globally by providing important insights into the relationship between a firm’s dividend policy and shareholders’ wealth for SC and NC firms. In addition, this study comprehensively compares the results for both firm types, which is also lacking in the existing literature. Because this study is based in Pakistan, the generalizability of the results would be limited.

The findings of this study are helpful for the management of SC and NC firms in devising their dividend policies that can maximize their shareholders’ wealth. This study also provides guidance and knowledge to investors in choosing companies for their investments that can maximize their wealth.

To the best of the authors’ knowledge, this is the first study that analyzes the relationship between dividend policy and shareholders’ wealth for SC firms in Pakistan. It is also the first study that comprehensively compares the dividend policy relationship with shareholders’ wealth for SC and NC firms. In addition, using the F-test for joint hypotheses to compare the specific effect of each dividend policy variable is a methodological contribution of the study.

This study aims to compare capital structure determinants' effect on the leverage levels of Shariah-compliant (SC) and noncompliant (NC) firms in Pakistan. This study also estimates and compares the capital structure adjustment speed for both firm types.

Based on the Karachi Meezan Index screening criterion, a balanced panel of 117 SC and 68 NC firms listed on the Pakistan Stock Exchange from 2008 to 2018 was constituted. This study used the generalized method of moments to identify the significant determinants of capital structure and estimate the speed of adjustment. In addition, the F-test was used to check whether the effect of the determinants on the leverage is same for SC and non-SC firms.

The authors found that different determinants affect both firm types' leverage levels (book and market) differently. The authors also found that the adjustment speed of SC firms toward their target leverage ratio is slower than their NC peers. Lastly, significant variation was observed in the results under different screening criteria.

This study fills the literature gap by providing a comprehensive comparison of the capital structure decisions of the SC and non-SC firms. Because this study is limited to Pakistan, generalizability would be an issue.

This study will guide the management of SC and non-SC firms about which factors are reliably important in choosing their capital structure. The findings also call for bringing harmony in the different Shariah screening criteria being in practice.

To the best of the authors’ knowledge, this is the first comparative study that identifies the significant capital structure determinants for SC and NC firms and investigates their effect on the leverage of both firm types. By testing joint hypotheses of same relationship, this study seeks to determine if, because of Shariah restrictions, the capital structure determinants of SC firms are similar to NC firms or they exhibit different behavior. The authors also repeat their analysis using other prominent screening criteria to assess the consistency of their results.

This study examines the influence of peers in the tax compliance setting using a social learning theory approach to investigate the effect of observing a peer's likelihood of reporting income. We also examine the role that gender plays in these decisions. We ask participants to estimate the likelihood of reporting income and to make a binary compliance decision in a setting where they are able to observe what they believe is another's response to a hypothetical tax reporting scenario. Participants who viewed the decision of a noncompliant peer were less likely to report honestly than those who viewed the decision of a compliant peer. This finding provides further evidence of a potential effect for peer influence. Consistent with prior literature, we find that women are more likely to comply than men, but do not find an interactive effect with peer observation. A supplemental experiment indicated that participants who believed their responses would be seen by a peer were less likely to report honestly than participants who believed their responses would remain private. This result, although counter-intuitive, is consistent with Wenzel's (2005a) description of a self–other discrepancy and conformance to a misperceived social norm.

Exploiting a novel measure of innovation, the authors investigate whether independent directors improve innovation efficiency. This novel measure of innovation captures the extent to which the firm generates revenue from its research & development and is, therefore, more economically meaningful. The authors also use a text-based measure of innovation.

The authors rely on a quasi-natural experiment based on the passage of the Sarbanes-Oxley Act of 2002 that compelled certain firms to raise board independence. The difference-in-difference analysis is far less vulnerable to endogeneity and is more likely to show a causal influence, rather than a mere association.

The results show that more independent directors improve innovation efficiency significantly. Specifically, firms forced to raise board independence experienced a much higher increase in innovation than those not required to change their board composition. The authors also explore another novel measure of innovation, a text-based metric of innovation.

The research is original in several ways. First, the authors take advantage of an exogenous regulatory shock as a quasi-natural experiment. This approach is far less susceptible to endogeneity. Second, the authors use a novel measure of innovation efficiency, i.e. research quotient, which is more economically meaningful. Finally, the authors use a unique measure of innovation derived from powerful textual analysis.

In this study, targeted interventions were applied in a natural quasi-experimental setting to taxpayers engaged in sales tax theft and evasion to gauge both the direct and indirect impacts of a responsive regulation approach to compliance enforcement. The approach adopted included substantial engagement with targeted businesses and deferral of more punishing forms of deterrence based on the target's level of cooperation and effort to return to and maintain compliance. Results were was found to be 2.17:1. Additionally, the impact of the targeted responsive regulation interventions greatly exceeded the results obtained in deterrence-only control groups in terms of tax assessments compared to multiple control groups to determine the indirect impact of the interventions and to compare the responsive regulation approach to traditional deterrence-only enforcement results. The indirect versus direct impact of the targeted responsive regulation enforcement regimen overall and assessment per dollar of cost ($322.19 vs. $5.21).

Among the primary suggestions for reform of the Dispute Settlement Understanding (DSU) of the WTO has been remedies for noncompliance. Prior literature has considered remedies in the context of deliberate breach of commitments. The WTO increasingly has, however, been negotiating commitments in subjective areas of policy. Thus, we provide a model of the DSU under which members' interpretations of concessions differ. This induces disputes regarding violation of commitments.

The Dispute Settlement Body (DSB) has promoted compliance primarily through authorization of retaliation (prospective punishment) after expiration of a reasonable period of time for the implementation of a verdict. As has been noted, this does not compensate a complainant for a violation of obligations and enables the respondent to circumvent punishment for imposing a cost upon a member of the WTO by reforming its offending policy reasonably promptly. We consider retrospective penalties (compensation for a loss) with and without reinforcement by retaliation as alternative enforcement mechanisms and find that a simple retaliatory punishment scheme is preferable. A penalty is unenforceable, as a member that is unwilling to reform its policy after an adverse judgment can decline to provide compensation. A penalty reinforced by retaliation can reduce compliance relative to a simple prospective punishment by raising the cost of abiding by the judgement.

Remedies also affect the negotiation of commitments. Members are more willing to make and less willing to accept unenforceable commitments. In this regard, the simple prospective punishment scheme is preferable.

In this paper, the authors examine the relation between cross-listing and the noncompliance with the mandatory corporate social responsibility (CSR) expenditure regulation in India, the first country to legally mandate the CSR expenditure.

The authors apply panel logit and ordinary least square (OLS) regression models to examine the impact of cross-listing on the noncompliance with the mandatory CSR expenditure regulation because panel regression has lesser multicollinearity problems and has the benefit of controlling for individual or time heterogeneity mostly present in cross-section or time series data.

Using a sample of 1,027 listed Indian firms, the authors show that the cross-listed firms are more likely to comply with the mandatory CSR expenditure than non-cross-listed firms. The authors further show that this relation holds only for those firms which are exposed to higher agency problems, for firms affiliated to business groups and for firms operating in high litigation risk industries. Finally, the authors show that cross-listed firms complying with the mandatory CSR expenditure command more valuation premiums.

This study’s results suggest that the noncompliance of the Indian firms with the mandatory CSR expenditure regulation comes down once they cross-list their shares in the US or the UK since such firms have to bond to the stronger corporate governance standards of the listed country. Hence, the authors recommend that merely making the investment in CSR activities mandatory may not serve the purpose and the convergence in corporate governance as well as compliance with the CSR expenditure can be achieved through cross-listing in US and UK markets.

One, the authors analyze the effect of cross-listing on the likelihood and magnitude of noncompliance with the CSR mandate. Two, this study is based in India where CSR expenditure has been made mandatory under the Companies Act, 2013. Using CSR mandate as a natural experiment, the authors have access to a richer data set on CSR in terms of the actual expenditure made by the company on CSR activities and the mandatory amount to be spent in a particular year.