Ratings-Based Regulation and Systematic Risk Incentives

• 成果类型: Article
• 署名作者: Iannotta, Giuliano; Pennacchi, George; Santos, Joao A. C.
• 署名单位: Catholic University of the Sacred Heart; University of Illinois System; University of Illinois Urbana-Champaign; Federal Reserve System - USA; Federal Reserve Bank - New York; Universidade Nova de Lisboa
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy091
• 发表日期: 2019
• 页码: 1374
• 关键词: deposit insurance; Bank regulation; Credit risk; equilibrium; SPREAD; MODEL; debt

摘要

Our model shows that when regulation is based on credit ratings, banks with low charter value maximize shareholder value by minimizing capital and selecting identically rated loans and bonds with the highest systematic risk. This regulatory arbitrage is possible if the credit spreads on same-rated loans and bonds are greater when their systematic risk (debt beta) is higher. We empirically confirm this relationship between credit spreads, ratings, and debt betas. We also show that banks with lower capital select syndicated loans with higher debt betas and credit spreads. Banks with lower charter value choose overall assets with higher systematic risk.