Wealth and risk implications of the Dodd-Frank Act on the U.S. financial intermediaries

Abstract

We contribute to the current regulatory debate by examining the wealth and risk effects of the Dodd-Frank Act on U.S. financial institutions. We measure the effects of key legislative events of the Act by means of a multivariate regression model using the seemingly unrelated regression (SUR) framework. Our results indicate a mixed reaction by financial institutions during the various stages of the Act's legislative process. Further tests reveal that any positive reactions are driven by small and/or low risk institutions, while negative ones are consistent across subsets; except for investment banks. We also find market risk increases for most financial institutions that are dominated by small and/or low risk institutions. The cross-section results reveal that large institutions fare better than their smaller counterparts and that large investment banks gain value at the expense of others. Overall, the Dodd-Frank Act may have redistributed value among financial institutions, while not necessarily reducing the industry's riskiness.

Regulatory constraint and small business lending: do innovative peer-to-peer lenders have an advantage?

“…Akhigbe et al (2016) present evidence that following the transition of the Dodd-Frank Act, banks discretionary risk-taking decreased due to the rising bank capital ratios and banks decreasing their non-performing loans levels. Andriosopoulos et al (2017), meanwhile, investigate the impacts of key legislative events of the act and their conclusions support our view that there were changes to the competitive structure of the financial services industry. Allen et al (2018) further investigate the market's response to the elimination of too-big-to-fail for large banks against the passage of the Dodd-Frank Act and suggest that act do not eliminate Too-Big-to-Fail banks.…”

“…Despite a large volume of published studies on bank regulations, a small subset of them focuses on the Dodd-Frank Act (e.g. Krainer 2012;Acharya and Richardson, 2018;Balasubramnian and Cyree 2014;Dimitrov et al 2015;Akhigbe et al 2016;Lutz 2016;Li et al 2016;Andriosopoulos et al 2017;Allen et al 2018;Bouwman et al 2018;Calem et al 2020;Bindal et al 2020).…”

Did the new Law for State-owned Firms affect those that are publicly traded?

“…Como destacado na sessão anterior, estudos diversos foram realizados para outros contextos e outras regulamentações como a Lei Dodd-Frank (Andriosopoulos et al, 2017;Gao, Liao & Wang, 2018), a Lei Sarbanes-Oxley (Jain & Rezaee, 2006) e a Lei Glass-Steagall (Kroszner & Rajan, 1995). Esses estudos, em geral, apresentam resultados inconclusivos sobre os efeitos dessas novas normas legais nos mercados financeiros.…”

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

“…Gao et al (2018) find that the effect of different proposals and events in the legislative process leading up to the adoption of the DFA had an individual and systemic risk-reducing effect on the "systemically important financial firms" in their sample. Andriosopoulos et al (2017), however, find mixed results in terms of risk for financial institutions during the various stages of the Act's legislative process. In the case of the DFA, Bouwman et al (2018) show that near-below-threshold banks alter their behavior to attempt to avoid or delay the regulatory costs.…”