Winning connections? Special interests and the sale of failed banks

Deniz Igan, Thomas Lambert, Wolf Wagner and Eden Quxian Zhang

Journal of Banking & Finance, 2022, vol. 140, issue C

Abstract: We study how banks’ special interests affect the resolution of failed banks. Using a sample of FDIC auctions between 2007 and 2016, we find that bidding banks that lobby regulators have a higher probability of winning an auction. However, the FDIC incurs larger costs in such auctions, amounting to 24.8 percent of the total resolution losses. We also show that lobbying winners match less well with acquired banks and display worse post-acquisition performance than their non-lobbying counterparts, suggesting that lobbying interferes with an efficient allocation of failed banks. Our results provide new insights into the bank resolution process and the role of special interests.

Keywords: Auction; Bank resolution; Board connections; Failed banks; Financial crisis; Lobbying; Rent seeking; Special interests (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Winning Connections? Special Interests and the Sale of Failed Banks (2017)
Working Paper: Winning Connections? Special Interests and the Sale of Failed Banks (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:140:y:2022:i:c:s0378426622000930

DOI: 10.1016/j.jbankfin.2022.106496

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