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Discussion Paper Details

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Title: Winning Connections? Special Interests and the Sale of Failed Banks

Author(s): Deniz Igan, Thomas Lambert, Wolf Wagner and Eden Quxian Zhang

Publication Date: November 2017

Keyword(s): bank resolution, failed banks, financial crisis, Lobbying and rent seeking

Programme Area(s): Financial Economics

Abstract: We study how lobbying affects the resolution of failed banks, using a sample of FDIC auctions between 2007 and 2014. We show that bidding banks that lobby regulators have a higher probability of winning an auction. In addition, the FDIC incurs higher costs in such auctions, amounting to 16.4 percent of the total resolution losses. We also find that lobbying winners have worse operating and stock market performance than their non-lobbying counterparts, suggesting that lobbying results in a less efficient allocation of failed banks. Our results provide new insights into the bank resolution process and the role of special interests.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12440

Bibliographic Reference

Igan, D, Lambert, T, Wagner, W and Zhang, E. 2017. 'Winning Connections? Special Interests and the Sale of Failed Banks'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12440