Download or read book The Impact of Financial Regulation on the U.S. Financial Intermediation Industry written by Kuan Liu and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Chapter 1, I develop a dynamic structural model to study the quantitative impact of the Dodd-Frank Act on small banks' operation costs. Banks in my model face a minimum capital requirement which constitutes a capacity constraint on lending for any given capital level. This constraint may be relaxed by raising capital financed by internal funds. Loosening the capacity constraint enables a bank to lend more and increase profits due to economies of scale associated with compliance costs. Exploiting the timing of Dodd-Frank's implementation in 2010, I structurally estimate its impact on all non-interest costs small U.S banks face, including entry costs that are not observable in data. I find that Dodd-Frank has heightened entry costs and compliance costs by 18% and 15% respectively. These increases induce a strong selection effect on small banks: less profitable banks exit in the short run while those who survive become 45% more profitable and less likely to exit in the long run. As a result, overall stability of the banking industry is promoted while small bank loan market concentration rises and total small bank lending drops by 13%. Chapter 2 studies the impact of a free duration extension on borrowers repayment behaviors in the Payday-Loan market. Payday-Loan borrowers pay sizable fees for short-duration loans and often borrow repeatedly. We explore the effects of longer loans, exploiting regulations that give some borrowers an additional pay cycle to repay their initial loan without increased interest charges. We show theoretically that while an exponential discounter would use this "grace period" to save and smooth consumption, naive borrowers with sufficient present bias would not because they procrastinate on making consumption sacrifices when due dates are distant. Consistent with predictions under naive present bias, borrowers with longer loans did not make larger initial loan payments and had similar repeat borrowing patterns. Chapter 3 provides an empirical assessment of the effects of asymmetric information between banks and outside creditors on the bank lending channel. Using bank opacity as a proxy for the degree of information asymmetry, I find that lending of more opaque banks are more sensitive to monetary policy. Intuitively, higher opacity induces more information asymmetry, which makes it more costly for banks to tap wholesale funding to make up monetary-policy-caused drops in insured deposits. In addition, my results also suggest that the effect of opacity is stronger for small banks. This is rationalized by the fact that small banks have more limited access to wholesale funding to begin with. Therefore, as opacity increases for small banks, the possibility of raising wholesale funding to offset the monetary-policy-induced loss of deposits may disappear altogether.