Lim, I orcid.org/0000-0001-7982-1554, Hagendorff, J and Armitage, S (2019) Is the fox guarding the henhouse? Bankers in the Federal Reserve, bank leverage and risk-shifting. Journal of Corporate Finance, 58. pp. 478-504. ISSN 0929-1199
Abstract
Nearly 30% of US banks employ at least one board member who currently serves (or has previously served) the Federal Reserve in a public service role. Public service roles take the form of Federal Reserve directorships or memberships in Federal Reserve advisory councils. We show that connections between banks and the Federal Reserve are linked to decreases in the sensitivity of bank leverage to risk. Further, connected banks extract larger public subsidies by shifting risk to the financial safety-net. Jointly, our results suggest that interactions between banks and regulators reduce supervisory effectiveness.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2019 Published by Elsevier B.V. Copyright (c) 2018 Elsevier B. V. All rights reserved. This is an author produced version of a paper published in Journal of Corporate Finance. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Federal Reserve; Banks; Regulatory connections; Risk-shifting; Public subsidies |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 19 Jul 2019 09:57 |
Last Modified: | 30 Oct 2020 01:38 |
Status: | Published |
Publisher: | Elsevier |
Identification Number: | 10.1016/j.jcorpfin.2019.04.012 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:148744 |