Do elections delay regulatory action?

J. Tyler Leverty and Martin Grace

Journal of Financial Economics, 2018, vol. 130, issue 2, 409-427

Abstract: This paper investigates whether elections delay regulatory action against failing financial institutions by exploiting the cross-sectional and time-series heterogeneity in the exogenous electoral cycles of US insurance regulators and governors. We find causal evidence that regulators delay interventions before elections. The extent of the delay is larger for elected regulators than regulators appointed by the governor. Interventions by appointed regulators are less likely before competitive gubernatorial elections. Regulatory governance mechanisms that constrain the discretion of regulators reduce the delays of appointed regulators but not elected. Finally, we find evidence that suggests electoral delays increase the ultimate costs of failure.

Keywords: Government policy and regulation; Political economy; Insurance; Electoral cycles; Incentives (search for similar items in EconPapers)
JEL-codes: D72 D73 G22 G28 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:130:y:2018:i:2:p:409-427

DOI: 10.1016/j.jfineco.2018.06.010

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