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The spillover effect of enforcement actions on bank risk-taking

Stefano Caiazza, Matteo Cotugno, Franco Fiordelisi and Valeria Stefanelli

Journal of Banking & Finance, 2018, vol. 91, issue C, 146-159

Abstract: Enforcement actions (sanctions) aim to penalize guilty companies and provide examples to other companies that bad behavior will be penalized. A handful of papers analyze the consequences of sanctions in banking for sanctioned companies, while no papers have investigated the spillover effects on non-sanctioned banks. Focusing on credit-related sanctions, we show the existence of a spillover effect: non-sanctioned banks behave similar to sanctioned banks, depending on their degree of similarity, offloading problematic loans and reducing their lending activity.

Keywords: Enforcement action; Banking; Credit; Spillover effect (search for similar items in EconPapers)
JEL-codes: G20 G21 G32 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.jbankfin.2018.04.008

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Handle: RePEc:eee:jbfina:v:91:y:2018:i:c:p:146-159