Regulatory Penalties Research Articles

Punishment or reward? Environmental information disclosure in Chinese listed companies based on evolutionary game systems

AbstractIn February 2022, the Chinese government implemented a mandatory environmental information disclosure policy for publicly traded corporations. To assess the factors influencing environmental information disclosure, we developed a tripartite evolutionary game system model based on strategic interactions between the government, enterprises and the public. Afterwards, we conducted a simulation to examine the systemic interaction equilibrium among the parties involved. Additionally, we assessed critical factor changes in decision‐making for three stakeholders: initial strategy selection, related policy subsidies, regulatory penalties and public incentives. Incorporating Gaussian white noise into the evolutionary game model enhances the realism of simulations, allowing for a more accurate representation of how random disturbances affect decision‐making among the government, the public and enterprises. The study reveals that the active participation of the public in information disclosure activities has a certain degree of substitution effect on the government's choice to regulate high‐quality information disclosure by enterprises actively. The penalty mechanism is more effective than the subsidy mechanism. The public's decision‐making process is susceptible to the direct economic benefits that enterprises can gain from disclosing low‐quality environmental information.

Penalties imposed on board chairs and corporate innovation: evidence from China

ABSTRACT While previous literature has explored the role of board chairs in firm performance, little is known about how penalties imposed on board chairs shape firms’ strategic decisions and their risk attitude. This study investigates the impact of penalties imposed on board chairs on corporate innovation. Drawing upon the reputation repair and resource dependence perspectives, we present two competing hypotheses that provide distinct insights into how penalties imposed on board chairs influence corporate innovation. Employing a comprehensive dataset of Chinese listed firms, we find that penalties imposed on board chairs lead to a decline in corporate innovation, supporting the resource dependence hypothesis. Further analysis find that this effect is more pronounced in firms with low redundant resources, high media attention, high industry competition, and those are non-state-owned. Our findings contribute to the growing body of the literature on board chairs, innovation and regulatory penalties by exploring the impact of penalties against board chairs on corporate innovation.

Platform liability, hate speech and the fundamental right to free speech

ABSTRACT In contemporary society, the rise of social media has dramatically transformed the sharing of information, bypassing traditional editorial and governmental controls. This shift has enabled rapid global information sharing but also raised concerns about the influence of social media platforms, even in democratic societies. Legislative responses, such as Germany's Network Enforcement Act of 2017, mandated swift removal of illegal content, influencing over twenty other nations to enact similar laws. These regulations often target hate speech but risk suppressing political opposition, particularly in authoritarian regimes. The European Union’s Digital Services Act came into force in 2024 and imposes stringent removal obligations on platforms. This enhanced platform regulation pushes companies towards the use of automated content moderation for purposes of meeting those obligations. A 2024 report found a substantial majority (87.5% to 99.7%) of deleted comments on Facebook and YouTube in France, Germany, and Sweden were legally permissible, suggesting that platforms, pages, or channels may be over-removing content to avoid regulatory penalties. Against the backdrop of this recent data, the paper examines the possible impact of stringent platform liability legislation on free speech in the ambit of hate speech, focusing on the delicate balance between regulation and freedom of expression.

The analysis of evolutionary strategies to facilitate the transformation of traditional buildings into prefabricated buildings

This paper establishes a two-party evolutionary game theory model comprising of the governments and prefabricated components suppliers as the players; and uses the replicator dynamic equations to analyze the evolution mechanisms each player’s strategy choices. Results from numerical simulations indicate that the evolution trajectory of the model is significantly influenced by not only the initial strategies of the players, but also by government incentives and regulatory penalties, as well as the costs and benefits resulted from each strategy choice. Also, prefabricated components suppliers exhibit greater responsiveness to variations in cost-related factors. When the subsidy and penalty respectively remain constant at 15% and 5% of the additional cost, the model exhibits both rapid and stable evolutionary trend towards the optimal evolutionarily stable strategy of full cooperation between the two players. This article proposes a suitable threshold for government incentives and penalties, besides serving as a guide for the steady and sustainable growth of the prefabricated buildings sector.

Performance ranking, regulatory penalty, and improper risk adjustment behavior of fund managers

This study is based on a sample dataset of Chinese open-end funds, empirically examining the relationship between performance ranking, regulatory penalty, and improper risk adjustment behavior of fund managers. The results indicate that class B penalties related to criminal offenses could mitigate the improper risk adjustment behavior resulting from agency issues among fund managers, thereby exerting an indirect deterrent effect. However, if the fund experiences a lower ranking in the mid-term evaluation or the top 20 stocks of a sample fund are subjected to regulatory penalties in the first half of the year, the impact is entirely reversed. Secondly, there is a positive correlation between the intensity of regulatory penalties and the degree of inhibition of fund managers’ improper risk adjustment behavior. The larger the expected gap and historically expected surplus, the more pronounced the trend of increasing improper risk-taking becomes. Finally, this paper conducted a collective study on the characteristics of fund managers and discovered that highly educated fund managers are significantly influenced by class B penalties, resulting in an indirect deterrent effect.

How digital finance impacts trade credit in supply chains: An analysis from Chinese A-share listed companies

Digital finance is reshaping trade credit. This study investigates the influence of digital finance on trade credit among A-share listed companies in China from 2011 to 2020. The paper matches this data with city-level digital finance index (DFI) data. Empirical results indicate that digital finance significantly benefits trade credit. This impact occurs through bank competition, regulatory penalties, and disclosure quality channels. Different levels of digital finance development and financing constraints of companies have a varying impact on trade credit. This paper provides a new perspective on trade credit in the firm's supply chain that enriches theoretical research on digital finance. The research results can help the country to implement digital finance development strategy better and offer relevant guidance and reference.

The price of corporate social irresponsibility in seasoned equity offerings: International evidence

We examine the impact of poor corporate social responsibility engagement signalled through negative environmental and social (E&S) incidents on equity financing via seasoned equity offerings (SEOs) across 25 countries. The results show that negative E&S incidents significantly aggravate SEO underpricing, thereby increasing the cost of raising equity capital. Managers appear to take the adverse effects into consideration as reflected in the reduced likelihood of issuing equity following the experience of negative E&S incidents. Further analysis shows that such adverse pricing effects are stronger for firms that are subject to significant social and regulatory penalties for their E&S misconducts, suggesting that negative E&S incidents increase corporate reputational losses and elevate regulatory risk. Finally, there are rich cross-country variations in the SEO pricing effects of E&S risks with legal investor protection and national culture playing an important role in influencing the pricing of E&S risk.

Green process innovation, green product innovation, leverage, and corporate financial performance; evidence from system GMM

Natural resource usage has produced various environmental challenges. Green process innovation has been considered a viable option that can help both industry and society. This study investigates the impact of green process innovation and green product innovation on corporate financial performance. We based our findings on a sample of 280 listed non-financial firms operating in South Asia. Information was gathered from firms' annual and CSR reports from 2012 to 2022. This study's data was analyzed using a two-step dynamic panel system GMM, correlation analysis, multicollinearity diagnostic tests, and descriptive statistics. Corporate financial performance is measured with ROA, ROE and Tobin's Q. Overall findings of the study show that green innovation has a significant positive impact on all measures of financial performance. Investing in the innovation of green products and green process can assist businesses in avoiding environmental concerns and regulatory penalties, while also assisting them in establishing new market prospects and achieving new levels of success with their green products. In addition, developing products that are friendly to the environment is tightly connected to expanding green competencies, promoting a company's green image, and improving the company's financial performance. Particularly useful for policymakers in developing countries, the study's findings can be used to introduce paradigm-shifting legislation and penalties that speed up business adoption of green process innovation.

Controlling Shareholders' Value and Corporate Tax Avoidance*

AbstractThis paper investigates whether and how controlling shareholders' value (i.e., the concentration of controlling shareholders' wealth within a business group) affects corporate tax planning using Korean chaebols. We find that firms with high controlling shareholders' value engage in a lower level of tax avoidance than other affiliates in the business group. We also find that controlling shareholders' concern about the costs of tax avoidance (i.e., regulatory penalties and reputational damages) are potential mechanisms that prevent firms with high controlling shareholders' value from aggressive tax planning. Lastly, we provide the value implication of tax avoidance for firms with high controlling shareholders' value.

A Retrospective Study of Documentation Shortfalls Mentioned in USFDA Warning Letters Issued to India Pharmaceutical Industries

The pharmaceutical industry is an indispensable sector that ensures patients have access to safe and effective medications. Therefore, it is essential that companies comply with regulatory standards and maintain accurate and complete documentation practices. This study will investigate the documentation violations cited in warning letters sent to Indian pharmaceutical companies between 2010 and 2022. The analysis will focus on identifying the most common documentation deficiencies and the impact they have on the pharmaceutical industry in India. The findings of this research will provide Indian pharmaceutical firms with valuable insights. to improve their documentation practices and ensure compliance with regulatory standards. This information will be useful for stakeholders in the pharmaceutical industry, including regulatory agencies, pharmaceutical companies, healthcare professionals, and patients. By understanding common documentation violations, companies can take proactive steps to prevent them and avoid regulatory penalties. The findings of this study will aid policymakers and regulatory agencies in devising strategies to enhance the integrity of pharmaceutical industry documentation practices. The findings will also inform the development of educational and training programs for pharmaceutical companies, which can help them enhance their documentation practices and ensure compliance with regulatory standards

Do regulatory penalties reduce risk-taking of banks?

This paper analyzes the impact of regulatory penalties on risk-taking of Chinese commercial banks during the period of 2009–2019. Our results reveal that regulatory penalties significantly reduce bank risk-taking, and the results still hold after taking endogeneity and robust tests into consideration. As mechanism test uncovers, regulatory penalties exert much pronounced effect on banks with better corporate governance and stronger market discipline. Furthermore, regulatory penalties enforce banks to improve asset structure in which the proportion of quasi-credit shadow-banking activities has decreased. On the other hand, the structure of bank lending also has changed by penalties with more funds flowing to the real estate sector, and less to the manufacturing sector. Based on those, this paper proposes to optimize regulatory penalty designation further, with the goal of stabilizing bank operating, reducing risk exposure, and providing better financial service for high-quality development in real sector.

Does violation of regulations hurt firm value enhanced: Evidence from Taiwan banking industry?

This study investigates the impact of penalties, including sanctions, corrections, and fine payments, on firm value within the context of the banking industry on the Taiwan Stock Exchange (TWSE) from 2017 to 2021. Utilizing data from the Financial Supervisory Commission, we employ rigorous statistical methods, such as multiple regression and Petersen regression models, to discern whether these punitive measures affect firm performance. Intriguingly, our findings indicate that firms subject to financial sanctions and penalties in Taiwan experience an improvement in their firm value, challenging the conventional belief that such penalties erode value. We propose that this unexpected outcome may be attributed to the potential gains derived from expanding business activities, even in violation of banking regulations, outweighing the associated regulatory costs. By shedding light on this under-researched aspect of the literature, our study contributes to a broader understanding of how regulatory penalties impact firm value in the banking industry, thereby providing regulatory authorities with practical insights.

Long-term Business Sustainability Through Corporate Governance

Effective corporate governance and sustainability practices can help a company build trust with stakeholders, reduce risks, and improve financial performance. They can also help a company demonstrate its commitment to responsible business practices and increase its credibility and transparency. However, companies that fail to address these issues may face reputational damage, financial losses, and regulatory penalties. Thus the role of corporate governance in long-term business sustainability is significant. The primary objective of this study is to investigate the concept of long-term business sustainability, with particular emphasis placed on the value that organizations bring to their stakeholders and shareholders, mainly through a discussion of the connection between corporate governance. The study analyses the numerous environmentally responsible business practices that are now in place by developing the findings by conducting a comprehensive literature review. Conclusions were drawn about the relationship between corporate governance and long-term business viability based on the literature review after discussing the result.

Does the threat of enforcement of financial regulations affect the cost of equity in weak institutional environments?

Using the imposition of annual on-site inspections of publicly listed firms by local China Securities Regulatory Commission (CSRC) offices as a quasi-natural experiment, we examine how the threat of potential enforcement of financial regulations affects firms' implied cost of equity in weak institutional environments. In a staggered difference-in-differences (DID) framework, we show that compared with firms subject to the lottery of prospective on-site inspections, firms that are exempt from on-site inspections for three consecutive years display an average increase of 210 basis points in the cost of equity. This effect is more pronounced for firms with regulatory penalty records, firms domiciled in jurisdictions with more actions imposed on listed firms as a result of on-site inspections in the past, firms located closer to their respective local CSRC offices and state-owned firms (SOEs). Further analysis suggests that the exemption from on-site inspections increases firms' cost of equity through the channels of increased tunnelling activities from controlling shareholders, reduced financial reporting quality and more severe information asymmetry faced by external investors. Thus, the valuation of exempt firms decreases. Our findings suggest that in weak institutional environments, the threat of financial regulators' enforcement ex ante increases firm value by reducing external investors' estimation of firms’ long-term risks.

Are critical success factors for cybersecurity just technical issues Cybersecurity management and the human factor

Purpose- With the rapid advancement of information and communication technologies, businesses are facing growing security risks. The prevalence, intensity, and complexity of cyber attacks worsen these vulnerabilities, leading to a rising focus on cybersecurity. Enterprises exposed to such cyberattacks might not only face considerable financial losses but also experience data breaches, operational interruptions, harm to their reputation, regulatory penalties, legal expenses, reduced competitive standing, and increased insurance premiums. In this concept study discusses the importance of human factors in cybersecurity management. While organizations spend billions on information technology systems and software to detect and prevent cyber threats, individuals play a critical role in managing these risks. Methodology- Through a review of literature and statistical data, study examines the factors contributing to cybersecurity breaches, the allocation of resources to address them, and proposes potential solutions. Findings- In the workplace, most research on cybersecurity focuses on employees as the most important source of vulnerability. In the literature review, it is understood that an employee’s carelessness and lack of awareness pose the greatest risk to cybersecurity. However, businesses often fail to show sufficient attention to human behavior in their efforts to keep organizational data secure and to plan security strategies. It is important to note that effective cybersecurity management requires not only technical controls but also the management of human factors. Meanwhile, security expenditures in enterprises are often disproportionately allocated to technology investments, with 97% being spent on technology investments, despite the fact that over 85% of breaches are attributable to human factors. Conclusion- In the literature review, it is understood that cybersecurity management is not only related to technical controls, but also the management of human factors is of critical importance. The management of individuals is also an essential cybersecurity responsibility. It is important to adopt a holistic approach to cybersecurity management includes both technical and human perspectives. Cybersecurity awareness has significant benefits for businesses to effectively manage cybersecurity which can be achieved by developing appropriate training programs and foster a cybersecurity culture. Keywords: Cybersecurity, cybersecurity management, cybersecurity awareness, technology investments, human factor JEL Codes: M12, M15, L86

Review of Occupational Health and Safety Management System and Hazards Controls in the Motion & Industrial Automation Products Manufacturing Industries

Occupational injuries are a major problem worldwide and affect all countries, particularly developing ones. In recent decades, the application of approaches such as the Occupational Health and Safety Management System (OHSMS) has led to the successful control of workplace injuries in high-income countries. The Occupational Health and Safety Assessment Series (OHSAS) 18001 as a world- recognized OHSMS has gained considerable acceptance by a large number of organizations. However, few studies have examined the effectiveness of ISO 45001on safety performance in certified organizations. This study consisted of four sub-studies, and was conducted to explore the effect of ISO 45001on the occupational injury, safety climate, and Occupational Health and Safety (OHS) practices in ISO 45001-certified companies compared with a control group in Iran. ISO 45001practices were also examined in the certified companies, where interviews were conducted to explore the influencing factors on the effectiveness of ISO 45001. A negative binomial regression indicated no significant effect of ISO 45001certification on the occupational injury rate. The second sub-study applied a new safety climate questionnaire, and a hierarchical regression indicated that the safety climate was influenced by the implementation of ISO 45001and safety training. The third sub-study pointed to the better OHS practices of the certified companies compared with the control ones. The results also showed that adopting the ISO 45001standard improved the documentation for the management of OHS, but did not lead to continuous improvement in the required practices. The evaluation of the collected evidence revealed the main reasons for a poor safety culture. The interviewees emphasized the internal and external influencing factors in the effectiveness of OHSAS including commitment of top management and the enforcement of OHS legal requirements. It can be concluded that the implementation of ISO 45001in an organization is not a guarantee of improved safety performance and of the existence of a high-quality management system. This study suggests that certified companies should focus on proper improvement and maintenance of the implemented management systems by escalating their commitment to the requirements of the established management systems and by participating their employees in ISO 45001practices. This study also emphasized the importance of providing safety training for employees who work in the certified companies. These efforts may help the companies in the creation of a good safety culture and the transforming the paper systems into effective management systems to make improvement in OHS performance. The aim of this report to assess and evaluate the effective implementation of occupational health & management system and hazards controls in the Motion & Industrial Automation products manufacturing Industries as per the relevant ISO standards and hierarchy of hazards controls, which is a system used in industry to minimize or eliminate exposure to hazards. Falls, chemical spills, fire, explosions, working at height, confined space working, mechanical material handling, etc. are few kinds of incidents that can happen in a manufacturing environment. Such incidents are not only tragic and frequently fatal for workers, but also extremely expensive for the employers. Between worker’s compensation, regulatory penalties, reduced/diminished productivity and the costs of fixing or replacing damaged equipment, a single incident can financially devastate a business. To avoid industrial accidents / catastrophes, keep your people from harm, ensure manufacturing compliance, and protect your bottom line, you need to get serious about safety. Manufacturing Safety is everything organizations does to ensure the physical well-being of the workers in the manufacturing facility or facilities. Manufacturing Safety is also about more than checking a few boxes or putting up ‘safety first’ signage.  Manufacturing Safety keeps people alive and unharmed.  Manufacturing Safety is also tied to workforce productivity.  Manufacturing Safety is an essential form of risk management.  Manufacturing Safety is a legal requirement.  Manufacturing Safety and Profitability go hand-in-hand. Safe companies perform better and sustain in the business longer that unsafe companies.

INTERNET FINANCIAL CRIME SECURITY PREVENTION AND CRIMINAL LAW REGULATION OPTIMIZATION PATH

Since the advent of the Internet, Internet and finance are becoming more and more closely integrated. In 2014, the banking industry paid around $65 billion in regulatory penalties, with misbehavior and anti-financial crime failures acting as key prosecution justifications. Many financial institutions are finding that it is difficult to properly handle growing requirements with their current processes and infrastructure, leading to significant increases in associated operational expenses. Recent improvements in data analytics, which allow a speedier analysis of larger, more thorough, and more diversified data sets, appear to have the potential to ease some of the key pain points in this context. This paper investigates the rise of Big Data in this sector, concentrating on use cases where advanced analytics is presently being applied, as well as its long-term potential.

Tripartite evolutionary game and simulation analysis of fishermen participating in cooperative management under government supervision

The construction of fishermen's organizations is an important way to extend and consolidate the fishery industry chain and speed up the modernization of fisheries. The Chinese government encourages the establishment of new fishery business entities in the form of fishermen's professional cooperatives. However, in the implementation of the policy, the coexistence of demonstration cooperatives and “empty shell” cooperatives is common. To explore the factors that affect the participation of fisheries in cooperative management under government supervision, by constructing a tripartite evolutionary game (TEG) model among fishermen, cooperatives and government departments, this paper analyzes the evolutionary stability of the three-party strategy selection of the game, discusses the influencing factors and their relationships to the three-party strategy selection, analyzes the stability of the equilibrium point in the game system, and uses MATLAB 2017A to conduct simulation analysis. The results show that first, increasing the income of cooperative operations, reducing the cost of close cooperation and increasing the amount of regulatory penalties contribute to the close cooperation of cooperatives. Second, the profitability of cooperatives and the reduction of fishermen's cooperation costs are key factors in promoting cooperation. Third, the interaction of the two key factors of cooperative profits and fishermen's cooperation costs will affect the strategic choices of the three parties in the game. Fourth, support funds have a two-way impact on the choice of three-party strategies. Finally, this study provides policy suggestions for the government to encourage fishermen to participate in cooperatives.

Spreadsheet Validation: A Detailed Review

Spreadsheet validation is a critical process for ensuring data accuracy and integrity in various domains, such as finance, research, and project management. As spreadsheets continue to be widely used for data analysis and decision-making, the need to validate their contents becomes paramount. It explores various techniques and best practices for validating spreadsheets, including formula auditing, data consistency checks, range validation, and error handling mechanisms. To address these concerns, this sheet delivers components of spreadsheet validation, including establishing robust validation processes, implementing appropriate controls, and ensuring proper documentation. It discusses the importance of validating formulas, data input, cell references, and data transformations to mitigate risks and maintain accurate results. This review explores the significance of spreadsheet validation in achieving ALCOA compliance. It highlights the challenges associated with spreadsheets as a commonly used tool for data management, including the potential for errors, data corruption, and lack of version control. The review also examines the potential consequences of non-compliance, such as regulatory penalties, compromised data integrity, and damaged reputations.

Zero Trust: A Paradigm Shift in Banking Cybersecurity

Rise in more advanced and frequent cyber threats are occurring in the banking sector than in any other sector, and therefore, sufficiency has to be achieved through conventional security para-digms. This paper aims to propose the necessity of adopting the zero-trust for cybersecurity in banking. Zero Trust is a concept that is different from the traditional perimeter security approach, whereby a user and eve device are required to prove its trustworthiness to access resources within or outside a network. This paper will view the important consequences of cybersecurity threats to the banking industry in terms of financial losses, reputational damage, and regulatory penalties. This will help banking institutions enhance their security stature through constant authentication, strict access controls, and strong monitoring mechanisms. The paper has highlighted some of the key strategies in implementing Zero Trust through network segmentation, multi-factor authentica-tion, and how advanced analytics can be used to accomplish this goal. It provides examples in the form of use cases and successful Zero Trust implementation examples already in practice within the banking industry, highlighting real accrued benefit from this approach. It finally discusses the scope and future trends of Zero Trust in banking cybersecurity, arguing that this model is not essentially a current imperative but lays down the foundational strategy for future-proofing the financial institution against any evolving cyber threats. This would be com-prehensive research to provide directions that must be able to guide the banks in their pursuit to transition into a zero-trust architecture for enhanced security and resilience against rising cyber threats.