The Value of Regulators as Monitors: Evidence from Banking

• 成果类型: Article
• 署名作者: Bisetti, Emilio
• 署名单位: Hong Kong University of Science & Technology
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.03083
• 发表日期: 2024
• 关键词: financial supervision; off-site surveillance; bank value

摘要

While conventional wisdom suggests that financial supervision is costly for bank shareholders, agency theory suggests that supervisors' audits can reduce shareholder monitoring costs. I study this trade-off in the context of an unexpected decrease in off -site surveillance intensity by the U.S. Federal Reserve. Banks subject to reduced surveillance experience a 1% loss in bank Tobin's q and a 7% loss in equity market -to -book. These banks engage in more earnings management, and appear to compensate lower regulatory surveillance with costly internal audits. My results document a novel substitution effect between public monitoring by regulators and private monitoring by shareholders.