| Journal of Finance
Level Playing Fields in International Financial Regulation
We analyze the desirability of level playing fields in international financial regulation. In general, level playing fields impose the standards of the weakest regulator upon the best-regulated economies. However, they may be desirable when capital is mobile because they counter a cherry-picking effect that lowers the size and efficiency of banks in weaker economies. Hence, while a laissez faire policy favours the better-regulated economy, level playing fields are good for weaker regulators. We show that multinational banking mitigates the cherrypicking effect, and reduces the damage that a level playing field causes in the better-regulated economy.
Multinational Firms and Management;
Governing Rules, Regulations, and Reforms;