The impact of financial regulation has critical importance on firm performance and profitability. The aftermath of the Financial Crisis of 2008 saw the biggest regulatory reform in the U.S. financial system since the Great Depression. One of the main causes of the crisis was the excessive risk-taking by large firms because prior financial regulations had loopholes that firms could take advantage of. This reform’s intended purpose is to address and fix those failures in past regulatory oversight. With 398 proposed rules and more than 2,000 pages, the Dodd-Frank Wall Street Financial Reform and Consumer Protection Act signed into law in 2010, tackles many issues and implements many changes to the financial system. For one, it established new government oversight agencies, such as the Consumer Financial Protection Bureau (CFPB) and the Financial Stability Oversight Council (FSOC); it also outlined new capital requirement standards for banks, aimed to strengthen investor protection, increase the transparency of OTC derivatives, and improve the regulation of credit rating agencies.
Our paper provides empirical evidence on whether the Dodd-Frank Act has any significant impact on the performance of U.S.-listed commercial and savings institutions while controlling for bank size. With a sample size of 640 publicly listed commercial and savings banks in the U.S. over each quarter between 2005-2014, we investigate the impact of the Dodd-Frank Act, bank-specific characteristics, and macroeconomic indicators on banks’ net interest margin, return on assets, and return on equity using a ‘difference-in-differences’ approach.
Our results indicate that the Dodd-Frank Act has a significant negative impact on bank performance, indicated by the net interest margin. Return on assets and return on equity show no significant difference between small banks and big banks. More importantly the interaction term, between the Big Bank dummy and the Dodd-Frank dummy, negatively correlates with bank performance for net interest margin, return on assets, and return on equity. Furthermore, we find that bank-specific characteristics explain a substantial portion of bank performance. The contribution of our work is that, to the best of our knowledge, our paper is the first to provide empirical evidence on the impact of the Dodd-Frank on US-listed commercial and savings banks performance using the most recent data for our analysis.
Inhaltsverzeichnis (Table of Contents)
- Abstract
- Introduction
- Literature Review
- The Dodd-Frank Act and its impact on the financial system
- The impact of regulation on banking performance
- Data and Methodology
- Data
- Methodology
- Empirical Results and Analysis
- The Dodd-Frank Act and bank performance
- Bank-specific characteristics and bank performance
- Macroeconomic indicators and bank performance
- Robustness Test
- Discussion
- The impact of the Dodd-Frank Act on bank performance
- The contribution of our work
- Limitations of the study and future research
- Conclusion
- References
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This dissertation examines the influence of the Dodd-Frank Act on the performance of publicly-listed commercial and savings banks in the United States. The study utilizes a difference-in-differences approach to analyze the impact of the Dodd-Frank Act, bank-specific characteristics, and macroeconomic indicators on banks' net interest margin, return on assets, and return on equity.
- The impact of the Dodd-Frank Act on the performance of US-listed commercial and savings banks
- The influence of bank-specific characteristics on bank performance
- The role of macroeconomic indicators in shaping bank performance
- The effectiveness of the Dodd-Frank Act in addressing regulatory failures that contributed to the 2008 financial crisis
- The potential implications of the Dodd-Frank Act for the future of the US financial system
Zusammenfassung der Kapitel (Chapter Summaries)
- Abstract: Provides an overview of the study's objectives, methodology, and key findings, highlighting the impact of the Dodd-Frank Act on the performance of US-listed commercial and savings banks.
- Introduction: Introduces the research problem, explaining the importance of the Dodd-Frank Act in addressing regulatory failures that led to the 2008 financial crisis. The chapter establishes the rationale for studying the act's impact on the performance of US-listed commercial and savings banks.
- Literature Review: Reviews existing literature on the Dodd-Frank Act and its impact on the financial system, as well as studies examining the influence of regulation on banking performance. This section provides context for the research and highlights key debates and findings from previous work.
- Data and Methodology: Describes the data sources and methodology used in the study, including the sample size, time period, and variables considered. This section details the specific techniques employed to analyze the impact of the Dodd-Frank Act on bank performance.
- Empirical Results and Analysis: Presents the key findings of the empirical analysis, examining the impact of the Dodd-Frank Act, bank-specific characteristics, and macroeconomic indicators on banks' financial performance indicators. The chapter discusses the significance of the results and their implications for understanding the Dodd-Frank Act's effect on the banking sector.
- Discussion: Discusses the implications of the study's findings, considering the broader context of the Dodd-Frank Act and its role in shaping the US financial system. This section explores the limitations of the research and suggests avenues for future research.
Schlüsselwörter (Keywords)
The primary keywords and focus topics of this dissertation are: Dodd-Frank Act, financial regulation, bank performance, commercial banks, savings banks, net interest margin, return on assets, return on equity, difference-in-differences approach, financial crisis of 2008, US financial system, banking regulation, regulatory oversight, financial stability.
- Quote paper
- Zhuo Jian Tang (Author), 2015, The Impact of the Dodd-Frank Act on the Performance of US-Listed Commercial and Savings Banks, Munich, GRIN Verlag, https://www.grin.com/document/337223
