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Regulatory Spillovers in Local Mortgage Markets

Lim, I; Nguyen, DD; Nguyen, HL

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We document novel evidence on the spillover effect of a corporate control regulation on local mortgage markets. We find that banks directly targeted by the Sarbanes-Oxley Act (SOX) to rectify their internal control weaknesses reduce mortgage originations following the regulation’s enactment. This causes mortgage credit to be reallocated toward other banks in the same local markets: while competing public banks expand lending to safer borrowers, private banks increase lending toward risky applicants. Consequently, loans originated by private banks in spillover counties report higher default rates.


Lim, I., Nguyen, D., & Nguyen, H. (in press). Regulatory Spillovers in Local Mortgage Markets. The Review of Corporate Finance Studies,

Journal Article Type Article
Acceptance Date Aug 21, 2022
Online Publication Date Oct 10, 2022
Deposit Date Oct 4, 2022
Publicly Available Date Dec 21, 2022
Journal Review of Corporate Finance Studies
Print ISSN 2046-9128
Electronic ISSN 2046-9136
Publisher Society for Financial Studies
Peer Reviewed Peer Reviewed
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Published Journal Article (563 Kb)

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Copyright Statement
© The Author(s) 2022. Published by Oxford University Press on behalf of The Society for Financial Studies.
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial License (, which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited. For commercial re-use, please contact

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