The Revolving Door for Financial Regulators
University of Notre Dame - Department of Finance
University of Notre Dame
July 21, 2014
We examine financial firms’ practice of hiring people with work experience at one of six U.S. financial regulators, and find that revolving door employee presence increases 18-55% from 2001 to 2013. Regulated firms, especially those anticipating enforcement action, are more than twice as likely to hire ex-regulators as are other financial firms. Average hiring announcement returns are positive, especially for board members and the top 3 positions at the firm. In the 1-4 quarters following a revolving door hire from an agency that regulates the firm, firms’ stock return volatility and downside risk decrease and leverage ratios and asset quality improve. Our results are consistent with ex-regulators initiating or facilitating policies of decreased risk at financial firms.
Number of Pages in PDF File: 53
Keywords: revolving door, regulationworking papers series
Date posted: November 9, 2013 ; Last revised: July 22, 2014
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