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Does political influence distort banking regulation? Evidence from the US

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  • Papadimitri, Panagiota
  • Pasiouras, Fotios
  • Pescetto, Gioia
  • Wohlschlegel, Ansgar

Abstract

This study examines the interplay between political influence and regulatory decision-making. Political influence is captured based on whether a bank is headquartered in a state where an elected official holds a chair position on a congressional committee related to the banking and financial services industry. Using data of US commercial banks over the period 2000–2015, we show that our measure of political influence reduces a bank's probability of receiving a formal regulatory enforcement action. Results are robust to the use of alternative model specifications and the sample restrictions. However, we find that various bank and environmental characteristics are important conditional factors.

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  • Papadimitri, Panagiota & Pasiouras, Fotios & Pescetto, Gioia & Wohlschlegel, Ansgar, 2021. "Does political influence distort banking regulation? Evidence from the US," Journal of Financial Stability, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finsta:v:53:y:2021:i:c:s1572308920301388
    DOI: 10.1016/j.jfs.2020.100835
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    Cited by:

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    More about this item

    Keywords

    Political influence; Congressional committees; Banking supervision; Enforcement actions;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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