25 Years IWH

Veranstaltung
16
Oct 2017

14:15 - 15:45

Does Bank Supervision Matter? Evidence from Regulatory Office Closures

We use a quasi-natural experiment to identify the effects of supervision on bank behavior. Under the decentralized structure of U.S. bank supervision, banks in the same geographic area may be supervised by different regulatory offices.

Speaker
Professor Jens Hagendorff , The University of Edinburgh
Location
IWH, conference room
Professor Jens Hagendorff

Über den Autor

Professor Jens Hagendorff

Jens Hagendorff is Professor of Finance at The University of Edinburgh. He was previously a Professor of Finance & Investment at Cardiff University, the AmBank Financial Services Professor at the University of Malaya (Kuala Lumpur), and the Martin Currie Professor in Finance & Investment at The University of Edinburgh. Jens has also worked at the Financial Stability Department of The Bank of Spain and as a lecturer at The University of Leeds. Jens held visiting positions in the U.S., Italy, and Spain, most recently as a visiting fellow at The Federal Reserve Bank of Atlanta and the Bank of Spain in Madrid.

We use a quasi-natural experiment to identify the effects of supervision on bank behavior. Under the decentralized structure of U.S. bank supervision, banks in the same geographic area may be supervised by different regulatory offices. We show that, following the closure of a regulatory office, banks previously supervised by that office increase their solvency risk and loan book compared with banks in the same counties that are supervised by a different regulatory office. Further, these banks exhibit lower risk-adjusted returns, lower asset quality, and opportunistic provisioning behavior for loan losses. Information asymmetry between banks and supervisors partly explains the results.

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