The real effect and consequence of regulation reform in corporate finance and banking

Yue Zhou
2021
This thesis includes three thorough studies which examine the real effect and consequence of regulation reform in banking and corporate finance over the last decades. It starts with a cross-country study which investigates how regulation and supervision over banks affect their systemic risk. Motivated by a new database of banking regulation and supervision from the Bank Regulation and Supervision Survey of the World Bank, we conduct an empirical analysis for banks from 65 countries from the
more » ... ntries from the period 2001 to 2013. We find that bank activity restriction, initial capital stringency and prompt corrective action are all positively related to systemic risk which is measured by Marginal Expected Shortfall. Next, to address the potential endogenous issue which can undermine the baseline results, we employ the staggered timing of Basel II regulation across countries as an exogenous event, and also instrumental variable analysis. Our results are held for both tests. On top of that, we conduct a series of robustness tests, including using weighted-least-square regression analysis to account for the differences in the number of banks across countries, subsamples, and using an alternative measure of systemic risk by SRISK. Last, we provide further evidence to show that positive relationship between regulation and supervision and systemic risk is through banks' capability of raising capital: the positive impact of bank regulation and supervision on systemic risk tents to be amplified if banks are bigger, but the effect can be alleviated of banks are better capitalized or more diversified. Overall, this study highlights the importance of capability of banks' capital raising, especially during difficult times. Our findings do not argue that bank regulation and supervision are detrimental to systemic risk, but instead call for the proper design and implementation of bank regulation. In the second one, we focus on how firms' CSR performance respond to the Interstate Banking and Branching Efficiency Act (IBBEA) passed in the U.S 1994 [...]
doi:10.5525/gla.thesis.82062 fatcat:qn3ipq2kangh7csere7cc6wtve