Watch What They Do, Not What They Say: Estimating Regulatory Costs from Revealed Preferences

37 Pages Posted: 24 Jan 2021

See all articles by Adrien Alvero

Adrien Alvero

Columbia University

Sakai Ando

Columbia University

Kairong Xiao

Columbia University - Columbia Business School

Date Written: December 3, 2020

Abstract

We estimate regulatory costs borne by financial institutions through a revealed preference approach. To avoid regulation, financial institutions endogenously downsize their assets to stay below regulatory thresholds. We propose a structural model of this bunching behavior and estimate it using the U.S. bank data before and after the Dodd-Frank Act of 2010. The estimated regulatory costs, while substantial in magnitude, are significantly lower than those in self-reported surveys by financial institutions.

Keywords: regulatory costs, the Dodd-Frank Act

Suggested Citation

Alvero, Adrien and Ando, Sakai and Xiao, Kairong, Watch What They Do, Not What They Say: Estimating Regulatory Costs from Revealed Preferences (December 3, 2020). Available at SSRN: https://ssrn.com/abstract=3735143 or http://dx.doi.org/10.2139/ssrn.3735143

Adrien Alvero

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Sakai Ando

Columbia University ( email )

New York

Kairong Xiao (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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