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date: 12 May 2021

Abstract and Keywords

This article employs a historical example, the New York Clearing House Association (NYCHA), to consider how firms rely on reputational solutions to fill the ‘institutional vacuum’ left by lack of formal regulation. It demonstrates that the effects of negative spillover on market confidence produced a reputation commons for banks during times of panic, and that the NYCHA was founded as a collective institutional solution for ameliorating the problem of reputation commons. The difficult fact in protecting reputational commons is that it requires many direct competitors in an industry to cooperate. The success of the NYCHA in mitigating panics was a result of the system of loan certificates, and of the monitoring and sanctioning regime that backed the system. The NYCHA confirms that self-regulation can solve the problem of reputation commons. The trend of globalisation in recent decades provides new possibilities for exploring industry self-governance as a solution for reputation commons.

Keywords: reputation, NYCHA, negative spillover, banks, reputation commons, loan certificates, firms, self-regulation, globalisation

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