The Revolving Door for Financial Regulators
University of Notre Dame - Department of Finance
University of Notre Dame
August 4, 2015
We test whether quid pro quo and/or regulatory expertise drives financial firms' hiring of former U.S. financial regulatory employees from 2001-2014. The number of Boardex-listed ex-regulators per firm has increased 33% during 2001-2014, and hiring is associated with positive average announcement returns and a salary premium. In the quarter after hire, market and balance sheet measures of firm risk decrease significantly. Tests using unregulated firms and exogenous shocks to regulatory experience suggest that firms hire ex-employees of their regulators when they need to reduce risk. We find little evidence of quid-pro-quo in regulatory event frequency or fines.
Number of Pages in PDF File: 57
Keywords: revolving door, regulation
Date posted: November 9, 2013 ; Last revised: August 5, 2015
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