A Fistful of Dollars: Lobbying and the Financial Crisis
By Deniz Igan, Prachi Mishra, T. Tressel. NBER macroeconomics annual, 2009
286 citations recorded by the source corpus.
Has lobbying by financial institutions contributed to the financial crisis? This paper uses detailed information on financial institutions' lobbying and mortgage lending activities to answer this question. We find that lobbying was associated with more risk-taking during 2000-07 and with worse outcomes in 2008. In particular, lenders lobbying more intensively on issues related to mortgage lending and securitization (i) originated mortgages with higher loan-to-income ratios, (ii) securitized a faster growing proportion of their loans, and (iii) had faster growing originations of mortgages. Moreover, delinquency rates in 2008 were higher in areas where lobbying lenders' mortgage lending grew faster. These lenders also experienced negative abnormal stock returns during the rescue of Bear Stearns and the collapse of Lehman Brothers, but positive abnormal returns when the bailout was announced. Finally, we find a higher bailout probability for lobbying lenders. These findings suggest that lending by politically active lenders played a role in accumulation of risks and thus contributed to the financial crisis.
Subfields: Finance, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/ca8318cbc7e7640b3e313e129f9e9fbcccdb2bad
Citations in the corpus
- Advancing the Empirical Research on Lobbying (2014, unknown): “…to engage in revenue hiding and avoid fraud detection, and to garner excess returns in the marketplace through a variety of mechanisms (Mian & Trebbi 2011; Blau et al. 2013; Hochberg et al. 2009; Igan et al. 2012; Yu & Yu 2011; Gelbach 2006; Richter 2011; Hill et al. 2011; Adelino and Dinc 2013).”
- Corporate lobbying, political connections, and the bailout of banks (2013, unknown): “…receive a variety of economic benefits in return (Richter, Samphantharak, and Timmons, 2009; Hochberg, Sapienza, and Vissing-Jorgensen, 2009; Igan, Mishra, and Tressel, 2009; Stratmann, 1991; Cooper et al., 2010; Hill, Kelly, and Van Ness, 2010; Jayachandran, 2006; Faccio & Parsley, 2009;…”
- The Value of Connections in Turbulent Times: Evidence from the United States (2016, unknown): “Senate—was found to be worth around 1% of firm value ( Jayachandran, 2006 ). Roberts (1990) found statistically significant but small effects on connected firms from the unexpected death of a U.”