U.S. Banks, Crises, and Bailouts: From Mexico to LTCM
Seoul National University, Business School
Dong Wook Lee
Korea University Business School
Rene M. Stulz
Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
This paper investigates the impact on bank stock prices of emerging market currency crises and bailouts. The stock market distinguishes between banks with exposure to a crisis country and other banks. In general, banks with exposures to a crisis country are affected adversely by currency events and positively by bailouts. Other banks are mostly unaffected by events in countries experiencing a crisis. The paper uses the impact of the LTCM crisis on bank stock prices to put the emerging market events in perspective. The LTCM crisis had no significant contagion effects in the banking sector either, but banks that participated in the LTCM rescue experienced negative stock returns when the rescue was announced.
Number of Pages in PDF File: 26
JEL Classification: F3, F33, F34, F4, F42, G15, G21working papers series
Date posted: February 29, 2000
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