The Revolving Door for Financial Regulators
University of Notre Dame - Department of Finance
University of Notre Dame
September 23, 2014
We find that the practice among public financial firms of hiring former employees of one of six U.S. regulatory agencies increased 18-55% from 2001 to 2013. A firm is twice as likely to hire an ex-regulator from an agency that regulates the firm, and average hiring announcement returns are positive, especially for board members and top executives. Following a revolving door hire from an agency that regulates the firm, stock return volatility and downside risk decrease and leverage ratios and asset quality improve. These results are absent for other executive hires, and are consistent with ex-regulators contributing to decrease risk at financial firms.
Number of Pages in PDF File: 59
Keywords: revolving door, regulation
Date posted: November 9, 2013 ; Last revised: September 24, 2014
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