Enforcement of banking regulation and the cost of borrowing

Yota Deli, Manthos D. Delis, Iftekhar Hasan and Liuling Liu

No 19/2018, Bank of Finland Research Discussion Papers from Bank of Finland

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 forces banks to lower their cost of credit, irrespective of other changes in their business models after the enforcement action.

JEL-codes: E44 E51 G21 G28 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/212427/1/bof-rdp2018-019.pdf (application/pdf)

Related works:
Journal Article: Enforcement of banking regulation and the cost of borrowing (2019)
Working Paper: Enforcement of banking regulation and the cost of borrowing (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2018_019

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().