Corporate culture and enforcement actions in banking
Enforcement actions are a key tool for supervisors to reduce moral hazard behavior at all banks, not just the banks sanctioned. We develop a new theoretical framework to link enforcement actions with bank behavior through corporate culture. Using a sample of enforcement actions in the US between 2006 and 2013, we find empirical evidence that supervisory actions influence bank behavior at both sanctioned and non-sanctioned banks and corporate culture plays an important role in moderating this relationship.
Area: Banking
Keywords: Enforcement actions, Bank Supervision, Corporate culture, Risk-taking, Lending
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