Dodd–Frank and risk in the financial services industry

Aigbe Akhigbe (), Anna D. Martin () and Ann Marie Whyte ()
Additional contact information
Aigbe Akhigbe: University of Akron
Anna D. Martin: St. John’s University
Ann Marie Whyte: University of Central Florida

Review of Quantitative Finance and Accounting, 2016, vol. 47, issue 2, No 7, 395-415

Abstract: Abstract We present evidence that discretionary risk taking by financial institutions has declined following the passage of Dodd–Frank. The largest institutions experience the greatest reduction in risk consistent with the legislation’s objective of reducing systemic risk and an ultimate goal of ending the too-big-to-fail doctrine. Analysis of a sample of banks, the most highly regulated financial institutions, reveals that banks exhibiting characteristics consistent with riskier business strategies prior to Dodd–Frank experience the greatest risk reduction. Further, banks that alter their business practices by increasing their capital ratios and reducing their level of non-performing loans following the law’s passage are shown to experience the greatest reduction in risk. Our results point to the efficacy of Dodd–Frank in reducing risk in the financial system.

Keywords: Dodd–Frank Regulation; Bank risk; Wall Street Reform; Wall Street Reform and Consumer Protection Act (search for similar items in EconPapers)
JEL-codes: G14 G21 G23 G28 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://link.springer.com/10.1007/s11156-015-0506-4 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:47:y:2016:i:2:d:10.1007_s11156-015-0506-4

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-015-0506-4

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().