Enforcement of banking regulation and the cost of borrowing
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|Title:||Enforcement of banking regulation and the cost of borrowing||Authors:||Deli, Yota
Delis, Manthos D.
|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 supervision; Enforcement actions; Syndicated loans; Loan pricing||DOI:||10.1016/j.jbankfin.2019.01.016||Language:||en||Status of Item:||Peer reviewed|
|Appears in Collections:||Economics Research Collection|
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