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The Impact of Supervision on Bank Performance
Author(s) -
HIRTLE BEVERLY,
KOVNER ANNA,
PLOSSER MATTHEW
Publication year - 2020
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12964
Subject(s) - profitability index , loan , business , sample (material) , banking industry , sample size determination , actuarial science , accounting , finance , statistics , chemistry , mathematics , chromatography
We explore the impact of supervision on the riskiness, profitability, and growth of U.S. banks. Using data on supervisors' time use, we demonstrate that the top‐ranked banks by size within a supervisory district receive more attention from supervisors, even after controlling for size, complexity, risk, and other characteristics. Using a matched sample approach, we find that these top‐ranked banks that receive more supervisory attention hold less risky loan portfolios, are less volatile, and are less sensitive to industry downturns, but do not have lower growth or profitability. Our results underscore the distinct role of supervision in mitigating banking sector risk.