The Impact of Political Uncertainty on Institutional Ownership
Bill Francis, Iftekhar Hasan, Yun Zhu
Journal of Financial Stability,
December
2021
Abstract
This paper provides original evidence from institutional investors that political uncertainty greatly affects investment behavior. Using institutional holdings of common stock, we find that institutions significantly reduce their holdings by 0.8–2.3% points during presidential election years. Such effect holds for gubernatorial elections with cross-state-border difference-in-difference analysis and for tests using a political uncertainty index. The effect is the opposite for American Depository Receipts (ADRs). In addition, we find that institutions benefit financially from the observed strategy, and such strategy is in line with predicted outcomes of presidential election polls.
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Mortgage Companies and Regulatory Arbitrage
Yuliya Demyanyk, Elena Loutskina
Journal of Financial Economics,
Nr. 2,
2016
Abstract
Mortgage companies (MCs) do not fall under the strict regulatory regime of depository institutions. We empirically show that this gap resulted in regulatory arbitrage and allowed bank holding companies (BHCs) to circumvent consumer compliance regulations, mitigate capital requirements, and reduce exposure to loan-related losses. Compared to bank subsidiaries, MC subsidiaries of BHCs originated riskier mortgages to borrowers with lower credit scores, lower incomes, higher loan-to-income ratios, and higher default rates. Our results imply that precrisis regulations had the capacity to mitigate the deterioration of lending standards if consistently applied and enforced for all types of intermediaries.
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