Michael Iselin

Regulatory Asset Thresholds and Acquisition Activity in the Banking Industry

This paper examines how the announcement of new regulations that require significant compliance costs for banks above the

Real Activities Management around Regulatory Asset Thresholds in the Banking Industry

10 billion asset threshold imposed by the Dodd-Frank Act affects acquisition activity in the banking industry. We argue that the additional compliance costs increase the demand for acquisition activity by banks approaching and just above the threshold. We document that after the announcement of the additional regulations, these banks 1) become more likely to engage in an acquisition; and 2) pay larger deal premiums for these acquisitions. Additionally, we find that the relative size of target banks increases for acquisitions made by banks right around the threshold after the announcement of the regulations. These findings suggest that implementing regulations that require significant compliance costs only on banks above specific asset thresholds can contribute to consolidation in the banking industry.

Regulatory Asset Thresholds and Real Activities in the Banking Industry

This paper examines how the announcement of new regulations that require significant compliance costs for banks above the

Estimating the Potential Impact of Requiring a Stand-Alone Board-Level Risk Committee

10 billion asset threshold imposed by the Dodd-Frank Act affects acquisition activity in the banking industry. We argue that the additional compliance costs increase the demand for acquisition activity by banks approaching and just above the threshold. We document that after the announcement of the additional regulations, these banks 1) become more likely to engage in an acquisition; and 2) pay larger deal premiums for these acquisitions. Additionally, we find that the relative size of target banks increases for acquisitions made by banks right around the threshold after the announcement of the regulations. These findings suggest that implementing regulations that require significant compliance costs only on banks above specific asset thresholds can contribute to consolidation in the banking industry.

Event-Specific Uncertainty and its Expected Resolution

This paper examines how the announcement of new regulations that require significant compliance costs for banks above the

The Effects of SFAS 157 Disclosures on Investment Decisions

10 billion asset threshold imposed by the Dodd-Frank Act affects acquisition activity in the banking industry. We argue that the additional compliance costs increase the demand for acquisition activity by banks approaching and just above the threshold. We document that after the announcement of the additional regulations, these banks 1) become more likely to engage in an acquisition; and 2) pay larger deal premiums for these acquisitions. Additionally, we find that the relative size of target banks increases for acquisitions made by banks right around the threshold after the announcement of the regulations. These findings suggest that implementing regulations that require significant compliance costs only on banks above specific asset thresholds can contribute to consolidation in the banking industry.

Bright Lines: How Regulatory Asset Thresholds Change the Banking Industry

This paper investigates the effects of the requirement under the Dodd-Frank Act that all large bank holding companies create a stand-alone, board-level risk committee. In addressing this issue I focus on banks that had not voluntarily created such a committee prior to the legislation, as these are the banks that are most affected by the new rule. I find that requiring large banks to maintain a risk committee is associated with increased capital ratios during the global financial crisis, but with decreased capital ratios during more stable economic conditions. The time varying nature of the results highlights the importance of estimating the effect of proposed policy changes over multiple states of the economy. This paper contributes to the literature by investigating the effects of a relatively understudied aspect of board structure, the presence of a risk committee, and by providing an identification strategy that can be used to investigate standard setting and regulatory changes before the changes are put in place.

Seemingly Inconsistent Analyst Revisions

Disclosure models predict stronger responses to new information when investors are more uncertain prior to the announcement of that information, and that returns will be concentrated in periods in which uncertainty is expected to be resolved. Yet empirical tests of these predictions have generated only modest support. We hypothesize that investor response to new information will depend upon the combined effect of uncertainty about the disclosed information and the extent to which that information will resolve uncertainty about firm value; we term the combined effect “event-specific uncertainty”. We examine investor response to earnings announcements, and find that investors respond more strongly when event-specific uncertainty is higher. We then show that a larger proportion of annual returns are realized during earnings announcement periods that are characterized by relatively higher ex ante event-specific uncertainty. Importantly, other measures of uncertainty do not demonstrate these results. Finally, we show that relative ex ante event specific uncertainty varies intuitively with the characteristics of a firm’s information environment.