Banking regulation - burden or blessing?
Purpose: The purpose of this paper is to explore the impact of regulation on previously unregulated banks’ balance-sheet growth using the 1880 Danish Savings Bank Act as a natural experiment. With the Act, Danish savings banks became, for the first time, subject to regulation and supervision whereas commercial banks continued as unregulated institutions. Design/methodology/approach: The main elements of the Act focussed on supervision and provisions to improve information transparency. The paper estimates the impact of the Act on the balance-sheet growth of Danish savings banks using bank-level panel data and a difference-in-differences approach. Findings: The paper finds no indications that the Act had a negative effect on the balance-sheet growth of savings banks compared to commercial banks in the short run. Furthermore, there are indications of a positive effect after a couple of years. This suggests that regulation is not always a burden for the regulated institutions and might even have a positive impact on their business activity. Originality/value: This paper is the first study using the introduction of banking supervision and regulation in the 1800s as a natural experiment to evaluate the causal effect of regulation on the balance-sheet growth of previously unregulated financial intermediaries.
Year of publication: |
2019
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Authors: | Abildgren, Kim |
Published in: |
Journal of Financial Economic Policy. - Emerald, ISSN 1757-6385, ZDB-ID 2501029-3. - Vol. 11.2019, 4 (04.11.), p. 548-562
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Publisher: |
Emerald |
Saved in:
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