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Regulatory competition and forbearance: Evidence from the life insurance industry

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  • McShane, Michael K.
  • Cox, Larry A.
  • Butler, Richard J.
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    Abstract

    Regulatory separation theory indicates that a system with multiple regulators leads to less forbearance and limits producer gains while a model of banking regulation developed by Dell'Ariccia and Marquez (2006) predicts the opposite. Fragmented regulation of the US life insurance industry provides an especially rich environment for testing the effects of regulatory competition. We find positive relations between regulatory competition and profitability measures for this industry, which is consistent with the Dell'Ariccia and Marquez model. Our results have practical implications for the debate over federal versus state regulation of insurance and financial services in the US.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 34 (2010)
    Issue (Month): 3 (March)
    Pages: 522-532

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    Handle: RePEc:eee:jbfina:v:34:y:2010:i:3:p:522-532

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Regulatory competition Regulatory forbearance Insurance regulation Financial services;

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