Year: 2018
Type: article
Abstract: Supervision of multinational banks (MNBs) by national supervisors suffers from coordination failures. We show that supranational supervision solves this problem and decreases the public costs of an MNB’s failure, taking its organizational structure as given. However, the MNB strategically adjusts its structure to supranational supervision. It converts its subsidiary into a branch (or vice versa) to reduce supervisory monitoring. We identify the cases in which this endogenous reaction leads to unintended consequences, such as higher public costs and lower welfare. Current reforms should consider that MNBs adapt their organizational structures to changes in supervision. Received January 9, 2017; editorial decision September 15, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
Source: Review of Financial Studies
DOI: 10.1093/rfs/hhy116
Institutions: University of Bologna, HEC Paris, University of Vienna
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3121844296