The real effects of banking supervision: Evidence from enforcement actions

Piotr Danisewicz, Danny McGowan, Enrico Onali and Klaus Schaeck

Journal of Financial Intermediation, 2018, vol. 35, issue PA, 86-101

Abstract: We present a novel way to examine macro-financial linkages by focusing on the real effects of bank supervisors’ enforcement actions. Exploiting plausibly exogenous variation in supervisory monitoring intensity, we show that enforcement actions in single-market banks trigger temporarily large adverse effects for the macroeconomy by reducing personal income growth, the number of establishments, and increasing unemployment. These effects are related to contractions in bank lending and liquidity creation, and are more pronounced when we consider enforcement actions on both single-market and multi-market banks, and in counties with fewer banks and greater external financial dependence.

Keywords: Macro-financial linkages; Real effects; Economic growth; Supervision; Enforcement actions (search for similar items in EconPapers)
JEL-codes: G21 G28 O43 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:35:y:2018:i:pa:p:86-101

DOI: 10.1016/j.jfi.2016.10.003

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