Enforcement of banking regulation and the cost of borrowing

Files in This Item:
Access to this item has been restricted by the copyright holder until:2022-01-29
File Description SizeFormat 
DDHL-19-09-2018.docx161.3 kBUnknownDownload    Request a copy
Title: Enforcement of banking regulation and the cost of borrowing
Authors: Deli, Yota
Delis, Manthos D.
Hasan, Iftekhar
Liu, Liuling
Permanent link: http://hdl.handle.net/10197/9909
Date: 29-Jan-2019
Online since: 2019-04-11T09:28:57Z
Abstract: We show that borrowing firms benefit substantially from important enforcement actions issued on U.S. banks for safety and soundness reasons. Using hand-collected data on such actions from the main three U.S. regulators and syndicated loan deals over the years 1997–2014, we find that enforcement actions decrease the total cost of borrowing by approximately 22 basis points (or $4.6 million interest for the average loan). We attribute our finding to a competition-reputation effect that works over and above the lower risk of punished banks post-enforcement and survives in a number of sensitivity tests. We also find that this effect persists for approximately four years post-enforcement.
Type of material: Journal Article
Publisher: Elsevier
Journal: Journal of Banking & Finance
Volume: 101
Start page: 147
End page: 160
Copyright (published version): 2019 Elsevier
Keywords: Bank supervisionEnforcement actionsSyndicated loansLoan pricing
DOI: 10.1016/j.jbankfin.2019.01.016
Language: en
Status of Item: Peer reviewed
Appears in Collections:Economics Research Collection

Show full item record

Google ScholarTM



This item is available under the Attribution-NonCommercial-NoDerivs 3.0 Ireland. No item may be reproduced for commercial purposes. For other possible restrictions on use please refer to the publisher's URL where this is made available, or to notes contained in the item itself. Other terms may apply.