Lobbying on Regulatory Enforcement Actions: Evidence from U.S. Commercial and Savings Banks

Thomas Lambert

Management Science, 2019, vol. 67, issue 6, 2545-2572

Abstract: This paper analyzes the relationship between bank lobbying and supervisory decisions of regulators and documents its moral hazard implications. Exploiting bank-level information on the universe of commercial and savings banks in the United States, I find that regulators are 44.7% less likely to initiate enforcement actions against lobbying banks. This result is robust across measures of lobbying and accounts for endogeneity concerns by employing instrumental variables strategies. In addition, I show that lobbying banks are riskier and reliably underperform their nonlobbying peers. Overall, these results appear rather inconsistent with an information-based explanation of bank lobbying, but consistent with the theory of regulatory capture. This paper was accepted by Amit Seru, finance.

Keywords: banking supervision; enforcement actions; lobbying; regulatory capture; risk taking (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:65:y:2019:i:6:p:2545-2572

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