An analysis of the financial implications

Camouflage Versus Discipline A third dimension along which CBA can vary is the motive of the person using it—and, relatedly, its effects on third parties.

financial implications in business

Ratio analysis is an effective tool for selecting stocks to study further. Would that other agency face genuinely different incentives in evaluating a given regulation, and how much value would participation by such an agency add if included in pre-rulemaking discussions?

CBA mandates consist of efforts to require agencies to conduct some or all elements of CBA policy—presumably because legislators believe agencies must be forced to conduct it. Three distinctions are often elided: whether by CBA one means policy analysis or law; whether by CBA one means a conceptual framework or quantification; and whether CBA is likely to camouflage or discipline regulation. Those agents are no more perfect than others, and their decisions will be uncertain. In the context of financial regulation, the judgment of regulatory staff is expert because the appointees of the financial agencies have generally spent their careers in and have developed specialized knowledge of finance, financial institutions, and financial markets. None of the other analyses monetized either the benefits or costs, identified the type and timing of them, or expressed them in constant dollars. Judicial review of quantified CBA can be expected to do more to camouflage discretionary choices than to discipline agencies or promote democracy. Policy Versus Law Lawyers instinctively understand the difference between a norm or a policy, on the one hand, and a law, on the other—even when that law tracks a norm or policy. They know that a clever way to shape regulation is to propose a law that tracks a general norm, the enforcement of which will have predictable effects that are not intuitive to non-lawyers. The asymmetry in perceived effect will allow political gains at a lower political cost than a straightforward law mandating or forbidding regulation. Circuit decisions striking down regulations on the supposed ground of inadequate CBA. Law introduces new agents into the picture—usually, courts. The most notorious decision in this line of cases was Business Roundtable, which struck down an SEC rule requiring public companies to include in their annual proxy statements, under limited circumstances, information about and the power to vote for board nominees nominated by large shareholders rather than solely those nominated by the incumbent board.

The Paperwork Reduction Act PRA requires agencies to justify collection of information from the public, to minimize the burden of any information collection process, and to maximize the utility of information gathered.

Robert W.

CBA is often used to mean policy analysis, but also to mean types of laws mandating the use of CBA or providing for judicial review of CBA or its inputs. Some effects of a given rule might be reliably quantified and monetized, while others might not be. Part IV concludes by reviewing the implications of the case studies. The primary general conclusion of the case studies is that CBA of such rules cannot be reliably and precisely quantified with current research methods. In non-financial regulatory domains, non-market goods, such as life, health, beauty, and biodiversity, have proven difficult to monetize with any degree of precision and confidence. Also, read the notes to the financial statements, which provide supplementary information needed for sound investment decisions. How would CBA work in practice, if applied to specific, important, representative rules, and what is the alternative? For example, in Chamber of Commerce v. The first was that the SEC declined to quantify costs of requiring more independent directors because it did not know how funds would respond to the rule. If the result is greater than one, this ratio indicates a company has a positive net worth.

Instead, CBA should be conducted only to the extent the relevant financial agencies choose to do so. They know, for example, that the effects of a law assumed to be justiciable requiring an agency to act reasonably will not simply equate to the actions that an agency, acting reasonably, would take.

In the case studies, the paper attempts to advance the substantive project of quantitative CBA of financial regulation itself, by specifying in more detail than prior research how CBA could be applied in specific contexts, and by more carefully describing, clarifying, and specifying sources of sensitivity of the results of quantified CBA in each study.

While ranges, bounds, threshold analyses, and incomplete but relevant evidence may all be viewed as part of quantified CBA, they begin to move the final result of CBA toward guesstimation, leaving it a matter of judgment whether and how the results of CBA should influence decision making.

cost-benefit analysis of financial regulation: case studies and implications

Neither Congress nor the Courts can force such decisions into the realm of science, and attempts to do so will be more political than legal, and do more to obscure than enlighten the public about the judgments financial regulation requires.

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Yale Law Journal