Economic Regulation and Corporate Governance: The Case of Wirecard

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.