Accounting and Finance Seminar - Louis Nguyen (King's College London)

9 October 2019, 1.00 PM - 9 October 2019, 2.15 PM

Louis Nguyen

G.15, 15-19 Tyndalls Park Road

Title - Regulatory Spillovers in Local Mortgage Markets

Abstract - 

This paper links a corporate control regulation to mortgage market spillovers. Our identification strategy relies on changes within a common mortgage market to detect regulatory spillovers. We find that banks directly targeted by the Sarbanes–Oxley Act (SOX) to rectify their internal control weaknesses refrain from originating risky mortgages following SOX. This causes a reallocation of risky mortgages toward private banks competing in the same local markets. Consequently, private banks with greater exposure to SOX incurred larger loan losses during the 2007 financial crisis. Overall, our paper highlights how regulatory interventions spill over across financial players through local market interactions.

 

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