We argue that obligatory compliance with stricter financial reporting rules (e.g., the US Sarbanes-Oxley Act) may entail important unintended consequences. Paradoxically, the amount of misreporting may increase because corporate boards spend more valuable resources fulfilling statutory mandates...

In this paper we use clinical studies to document how dominant shareholders have circumvented mandatory bid rules to appropriate wealth from minority shareholders. Dominant shareholders are numerous in continental Europe. Creative compliance with mandatory bid rules reveals the failure of boards...