This paper examines how political connections affect risk exposure of financial institutions. Using a geography-based measure, I find that politically connected firms have higher leverage and their stocks have higher volatility and beta. Furthermore, prior to the 2008 financial crisis,...

I investigate the role of moral hazard from government intervention on the risk-taking behavior of U.S. financial institutions prior to the 2008 financial crisis. I use cross-sectional variation in political connections to measure the effect of moral hazard. The central finding is a higher...