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Does Political Influence Distort Banking Regulation? Evidence from the US

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  • Panagiota Papadimitri

    (Portsmouth Business School)

  • Fotios Pasiouras

    (Montpellier Business School)

  • Gioia Pescetto

    (Portsmouth Business School)

  • Ansgar Wohlschlegel

    (Portsmouth Business School)

Abstract

This study examines the interplay between political influence and regulatory decisionmaking in the US banking industry. In particular, we assess whether elected officials with power in Congress impact regulatory decision making in the banking industry. Political influence is captured by whether a bank is headquartered in a state where an elected official holds a chair position on a congressional committee related to the banking and financial services industry. As a proxy for regulatory decisions, we take into account formal regulatory enforcement actions issued against US commercial banks over the period 2000-2015. We find an inverse relationship between our political influence variable and enforcement likelihood. In general, the results are robust to the use of alternative model specifications and the restriction of our sample. However, we find that various bank and environmental characteristics are important conditional factors.

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  • Panagiota Papadimitri & Fotios Pasiouras & Gioia Pescetto & Ansgar Wohlschlegel, 2018. "Does Political Influence Distort Banking Regulation? Evidence from the US," Working Papers in Economics & Finance 2018-09, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    • Handle: RePEc:pbs:ecofin:2018-09
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    Cited by:

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    More about this item

    Keywords

    Political influence; Congressional Committees; Banking supervision; Enforcement actions;
    All these keywords.

    JEL classification:

    • 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

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