phbs
2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 |
Distorted Risk Incentives from Size Threshold-Based Regulations
2018-04-17 09:25:00
by Shane Johnson, Texas A&M University

Wednesday, April 18, 2018 | 2:00pm-3:30pm | Room 337, HSBC Business School Building


Abstract


Many regulations that affect firms and banks in the economy are based on size thresholds. We develop a model that shows that such regulations distort risk-taking incentives, providing above-threshold firms with greater incentives to take risk and below-threshold firms the opposite. Risk distortion varies nonlinearly as a function of the distance from the size threshold, and is increasing in the magnitude of the regulatory costs. We test our model by examining changes in bank risk around the Dodd-Frank Act, a major banking regulation with size thresholds. We provide empirical evidence that supports the main predictions of the model.
COPYRIGHT @ 2013-2018 PHBS · SUPPORT BY ITS.PKUSZ.DEU.CN Guangdong-ICP prepared No.12081285