The Rise of Shadow Banking: Evidence from Capital Regulation
By Rustom M. Irani, Rajkamal Iyer, Ralf R. Meisenzahl, José-Luis Peydró. The Review of financial studies, 2018
221 citations recorded by the source corpus.
We investigate the connections between bank capital regulation and the prevalence of lightly regulated nonbanks (shadow banks) in the U.S. corporate loan market. For identification, we exploit a supervisory credit register of syndicated loans, loan-time fixed effects, and shocks to capital requirements arising from surprise features of the U.S. implementation of Basel III. We find that less-capitalized banks reduce loan retention, particularly among loans with higher capital requirements and at times when capital is scarce, and nonbanks step in. This reallocation is associated with important adverse effects during the 2008 crisis: loans funded by nonbanks with fragile liabilities are less likely to be rolled over and experience greater price volatility.
Subfields: Accounting, Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/65efe30e60b0be6788dc5b49250736a5e5a7d323
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Citations in the corpus
- Climate Change and Corporate Cash Holdings: Global Evidence (2020, methodology): “a test widely used in the literature (see, e.g., Mian and Sufi, 2014; Smith, 2016; Heimer, Myrseth, and Schoenle, 2019; Irani et al., 2021).”