Mortgage Restructurings and Regulatory Arbitrage : Evidence from the JOBS Act

Banks may be unwilling to restructure troubled mortgages after a crisis because such restructurings immediately reduce earnings and regulatory capital. To test this, I use a provision of the Jumpstart Our Business Startups (JOBS) Act of 2012 that allows some banks to deregister from the Securities and Exchange Commission (SEC). In the first stage, I show that banks deregister primarily to reduce accounting oversight. Further, deregistration leads to lower audit fees and provisions for loan losses, which helps earnings. Finally, deregistration causes banks to double their troubled mortgage restructurings. These results suggest that regulatory constraints may hamper restructurings