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Essays on financial gatekeeper regulation

Vetter, Felix Wolfgang (2020) Essays on financial gatekeeper regulation. PhD thesis, London School of Economics and Political Science.

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This thesis consists of three studies that investigate how regulation affects Certified Public Accountant (CPA) and financial adviser markets. The first chapter, which is co-authored with Stefano Cascino and Ane Tamayo, investigates whether local occupational licensing regimes create geographical labor market barriers. To study this question, we investigate the labor market consequences of a regulatory change that extended the geographical scope of CPA licenses. Prior to the regulatory change, CPAs required a separate license for each U.S. state they wished to provide services to. With the regulatory change, CPAs can offer services across state lines holding a single CPA license. Our study reveals that local occupational licensing regimes create meaningful labor market barriers. Specifically, we find that CPA wages and service prices decline with the removal of licensing induced geographical barriers. The second chapter, which is co-authored with Zachary Kowaleski and Andrew Sutherland, explores whether the content of exams financial advisers need to take to provide investment advice affects financial adviser misconduct. Specifically, we study differences in misconduct between advisers that are subject to exams with an emphasis on professional ethics and advisers subject to exams with an emphasis on technical material. Comparing two advisers within the same firm and year, we find that advisers subject to more ethics-related topics exhibit lower future misconduct rates. The third chapter, which is solo authored, investigates the relation between firm licensing requirements and entrepreneurship in audit markets. Specifically, I study whether mandatory peer review—that is, CPAs having to monitor each other in an effort to promote service quality—affects CPA entrepreneurship. I find that CPA entrepreneurship declines and entrepreneur exit rates increase with the introduction of mandatory peer review. Increases in exit rates, however, are not pronounced for lowquality service providers, but are concentrated among young female CPA entrepreneurs.

Item Type: Thesis (PhD)
Additional Information: © 2020 Felix Wolfgang Vetter
Library of Congress subject classification: H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
Sets: Departments > Accounting
Supervisor: Tamayo, Ane and Cascino, Stefano

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