Industry Self-Regulation as a Solution of Reputation Commons: A Case of the Commercial Bank Clearinghouse

Oxford Handbook of Reputation Commons, Chaper 14, pp. 279-296, 2012

Posted: 7 Nov 2012 Last revised: 14 Nov 2012

See all articles by Lori Yue

Lori Yue

Columbia University

Paul L. Ingram

Columbia University - Columbia Business School, Management

Date Written: May 6, 2012

Abstract

The performance of organizations depends partly on the reputations of their industries. Such reputations are “intangible commons.” Interest in protecting mutual welfare motivates members of an industry to engage in self-regulation. However, the current literature tends to have a pessimistic view of the efficacy of self-regulation in solving the problem of reputational commons. We argue that the obstacles forecasted by such pessimistic reasoning are context-bound and can be overcome if industry self-regulation includes effective sanctions and exclusion strategies. We investigate the case of the New York Clearing House Association, a community-based self-regulatory program, which, by promoting prudence among members, successfully ameliorated the negative spillover effect on market confidence during bank panics. We then identify five conditions that account for the efficacy of this self-regulation. We conclude by showing how research on institutional solutions to the problem of reputation commons can be extended.

Keywords: Self-regulation, reputation commons, banking regulation, collective action

JEL Classification: M10, M14

Suggested Citation

Yue, Lori and Ingram, Paul L., Industry Self-Regulation as a Solution of Reputation Commons: A Case of the Commercial Bank Clearinghouse (May 6, 2012). Oxford Handbook of Reputation Commons, Chaper 14, pp. 279-296, 2012, Available at SSRN: https://ssrn.com/abstract=2171970

Lori Yue (Contact Author)

Columbia University ( email )

665 W 130th St
New York, NY 10027
United States
2133616416 (Phone)

Paul L. Ingram

Columbia University - Columbia Business School, Management ( email )

3022 Broadway
New York, NY 10027
United States

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