Working Paper: NBER ID: w24460
Authors: Charles W. Calomiris; Mark Carlson
Abstract: We examine whether examiners were informed and contributed to the health of the banking sector. Information included quantitative information that was eventually made public, quantitative information that remained private, and subjective information dependent on the examiner’s production of additional, “soft” information that informed examiner assessments of the quality of bank assets and management. All three types of information were useful for gauging the condition of the bank, and affected bank behavior, including a publicly observable signal (skipping a dividend payment). Participants in the market for bank liabilities reacted to this signal in ways that promoted market discipline.
Keywords: bank examiners; financial stability; market discipline; 1893 panic
JEL Codes: G21; G28; N21; N41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| examiner assessments (Y40) | bank behavior (G21) |
| recommendation to suspend dividend payments (G35) | bank decisions to withhold dividends (G35) |
| bank decisions to withhold dividends (G35) | financial stability (G28) |
| examiner recommendations (Y50) | bank management practices (G21) |