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Bank Lobbying as a Financial Safety Net: Evidence from the Postcrisis U.S. Banking Sector

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  • Kentaro Asai

Abstract

I argue creditors, plausibly considering the link between bank lobbying and government bailouts, reflect the financial-safety-net aspect of bank lobbying. My structural estimation based on U.S. data suggests bank lobbying is negatively associated with the occurrence of a run-like equilibrium when a bank is subject to multiple equilibria. The estimated effect on bank risk and value is economically significant in the postcrisis U.S. banking sector. This result is consistent with the reduced-form evidence in this paper and has passed multiple robustness checks. Counterfactual simulations suggest the lobbying effect as a financial safety net would vary depending on policy responses to financial crisis. (JEL E44, G01, G21, G28, G32, D72)

Suggested Citation

  • Kentaro Asai, 2024. "Bank Lobbying as a Financial Safety Net: Evidence from the Postcrisis U.S. Banking Sector," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 13(3), pages 739-774.
    • Handle: RePEc:oup:rcorpf:v:13:y:2024:i:3:p:739-774.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfac042
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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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