The real effects of banking supervision: Evidence from enforcement actions

Danisewicz, Piotr; McGowan, Danny; Onali, Enrico; Schaeck, Klaus

Abstract

We present a novel way to examine macro-financial linkages by focusing on the real effects of bank supervisors’ enforcement actions. Exploiting plausibly exogenous variation in supervisory monitoring intensity, we show that enforcement actions in single-market banks trigger temporarily large adverse effects for the macroeconomy by reducing personal income growth, the number of establishments, and increasing unemployment. These effects are related to contractions in bank lending and liquidity creation, and are more pronounced when we consider enforcement actions on both single-market and multi-market banks, and in counties with fewer banks and greater external financial dependence.

Citation

Danisewicz, P., McGowan, D., Onali, E., & Schaeck, K. (2016). The real effects of banking supervision: Evidence from enforcement actions. Journal of Financial Intermediation, 35, 86-101. https://doi.org/10.1016/j.jfi.2016.10.003

• Journal Article Type: Article
• Acceptance Date: Oct 24, 2016
• Online Publication Date: Oct 27, 2016
• Publication Date: Oct 27, 2016
• Deposit Date: Jun 10, 2024
• Journal: Journal of Financial Intermediation
• Print ISSN: 1042-9573
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 35
• Pages: 86-101
• DOI: https://doi.org/10.1016/j.jfi.2016.10.003
• Public URL: https://durham-repository.worktribe.com/output/2480874