Do Elections Delay Regulatory Action?
50 Pages Posted: 27 Sep 2013 Last revised: 11 Jan 2018
Date Written: October 27, 2017
This paper investigates whether elections delay regulatory action against failing financial institutions by exploiting the cross-sectional and time-series heterogeneity in the exogenous electoral cycles of U.S. insurance regulators and governors. We find causal evidence that regulators delay interventions before elections. The extent of the delay is larger for elected regulators than regulators appointed by the governor. Interventions by appointed regulators are less likely before competitive gubernatorial elections. Regulatory governance mechanisms that constrain the discretion of regulators reduce the delays of appointed regulators but not elected. Finally, we find evidence that suggests electoral delays increase the ultimate costs of failure.
Keywords: Government Policy and Regulation, Political Economy, Insurance, Electoral Cycles, Bureaucrats, Politicians, Incentives
JEL Classification: G28, G22, D72, D73
Suggested Citation: Suggested Citation