Winning Connections? Special Interests and the Sale of Failed Banks

Author/Editor:

Deniz O Igan ; Thomas Lambert ; Wolf Wagner ; Quxian Zhang

Publication Date:

November 22, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

We study how lobbying affects the resolution of failed banks, using a sample of FDIC auctions between 2007 and 2014. We show that bidding banks that lobby regulators have a higher probability of winning an auction. In addition, the FDIC incurs higher costs in such auctions, amounting to 16.4 percent of the total resolution losses. We also find that lobbying winners have worse operating and stock market performance than their non-lobbying counterparts, suggesting that lobbying results in a less efficient allocation of failed banks. Our results provide new insights into the bank resolution process and the role of special interests.

Series:

Working Paper No. 17/262

Subject:

English

Publication Date:

November 22, 2017

ISBN/ISSN:

9781484330104/1018-5941

Stock No:

WPIEA2017262

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

47

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