TITLE:
Economic Regulation and Corporate Governance: The Case of Wirecard
AUTHORS:
Frederick Betz, Michael Kim
KEYWORDS:
Regulatory Economics, Market Imperfections, Corporate Law, Corporate Governance, Corporate Performance, Corporate Integrity, Corporate Auditing, Securities Regulation, Global Corporations, Financial Reporting
JOURNAL NAME:
Modern Economy,
Vol.12 No.9,
September
29,
2021
ABSTRACT: An important normative theory in economics is that
all markets are perfect—perfect in the sense that “prices” in a market should
be set by balancing “demand” against “supply”. Certainly, this is a desirable
theory, by reducing government interference in pricing in a market to leave
economic interactions as principal forces—particularly so in financial markets.
But in reality, this desirable theory does not do away with government
regulation, because markets can be corrupted or misused (and this has sometimes
been called “market imperfections”). Empirically in economic history, money has
sometimes been made by economic agents in a market through using corruption or
misuse of market forces. Thus, as an empirical reality in economic systems, the
need for regulation always exists. This research analyzes an actual case of
market corruption on an international scale, the Wirecard scandal. We analyze
this empirical case to expand regulatory theory by investigating the kind of
roles needed to be played by some market forces (e.g. government regulators,
corporate auditors, and financial reporters) in order for “imperfections” of
financial markets to be avoided or corrected.