The Revolving Door for Financial Regulators
University of Notre Dame - Department of Finance
University of Notre Dame
February 28, 2014
We find that financial firms' practice of hiring people with work experience at one of six U.S. financial regulators has grown substantially from 2001 to 2013. Regulated firms, especially those anticipating enforcement action, are more than twice as likely as other financial firms to hire ex-regulators, and hires tend to have more work experience at the regulator than non-hires. Hiring announcement returns are significantly positive, especially after recent regulatory action and for the top 3 positions at the firm. The recent hire and presence of revolving door employees at financial firms predicts increased enforcement action by that regulator. Revolving door hires are associated with a decrease in stock return volatility and an improvement in leverage ratios and asset quality in the subsequent 1-4 quarters.
Number of Pages in PDF File: 53
Keywords: revolving door, regulationworking papers series
Date posted: November 9, 2013 ; Last revised: February 28, 2014
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