The Impact of the Dodd-Frank Act on Small Business

Bordo, Michael D.; Duca, John V.

doi:10.24149/wp1806

Cited by 5 publications

(1 citation statement)

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“…For example, banks experiencing regulatory costs could seek to increase their credit supply to the riskiest borrowers to compensate for the decrease in leverage risk (Calem & Rob, 1999). They could also exploit borrowers by charging higher loan rates (Bouwman et al, 2018) and reducing small loans (Bordo & Duca, 2018) to offset the regulatory costs. This could lead to a reduction in costly monitoring activities, which in turn may translate into increasing the riskiness of loans held by banks.…”

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confidence: 99%

Lending and risk controls for BHCs after the Dodd–Frank act

Degl'Innocenti,

Zhou,

Zhou

2023

J of Financial Research

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We investigate the impact of the Dodd–Frank Act (DFA) on the credit risk behavior of complex bank holding companies (BHCs). Specifically, we assess the effectiveness of the DFA in reducing the credit riskiness of complex banks. Consistent with the moral hazard hypothesis, we find that complex BHCs affected by the DFA increase their credit risk. We argue that possible explanations are that BHCs decreased their lending portfolio quality, loan monitoring, and strength and independence of the risk management function after the DFA. The results are robust to endogeneity concerns, different sample selection criteria, various model and treatment specifications, and placebo tests.This article is protected by copyright. All rights reserved.

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confidence: 99%