A difficulty with oaths: On trust, trustworthiness, and signalling |
| |
Authors: | Matthew Braham Friedel Bolle |
| |
Institution: | 1. Institute of SocioEconomics (IAW), University of Hamburg, Von-Melle-Park 5, 20146, Hamburg, Germany 2. Faculty of Economics, Europa-Universit?t Viadrina (Oder), Postfach 1786, 15207 Frankfurt (Oder), Germany
|
| |
Abstract: | In the wake of the Enron and Worldcom financial scandals that rocked Wall Street in 2002, the US government’s financial regulatory
body, the Security and Exchange Commission (SEC) took the unprecedented step in June 2002 of requiring that the chief executives
and chief financial officers of America’s 947 biggest companies to swear on oath that their company results and financial
reports were to the best of their knowledge accurate. The one-off order was quickly followed by the passing of the Sarbanes-Oxely
act, which will require many more CEOs and CFOs to certify their company reports and financial statements at regular intervals.
In this paper we apply a simple signalling model to examine whether or not this type of institutional signal of trustworthiness
is always efficient. We find that in the presence of signalling costs, the separating equilibrium can be socially inefficient
as well as causing a general loss of trust.
JEL classificationC72. D81. D82. K22 |
| |
Keywords: | Asymmetric information Institutional signals Oaths Risk Trust |
本文献已被 SpringerLink 等数据库收录! |
|