The Value of Being Systemically Important: Event Study on Regulatory Announcements for Banks
Posted: 23 Jan 2014 Last revised: 8 Dec 2015
Date Written: January 22, 2014
It is assumed that the awarding of a "systemic importance" seal by the regulator has a positive effect on the equity value of its holder. By employing an event study analysis on a new set of regulatory announcements, we find that financial market participants react to these announcements which are, in effect, judgments that a certain credit institution is systemically important. However, the stock returns found for the respective banks are not exclusively positive; a phenomenon for which we provide explanations. Furthermore, our results show that market reactions on the most present event are weakest indicating that the announcements' informational value to market participants diminished.
Keywords: too big to fail, systemic risk, moral hazard, financial crisis, bailout, banking regulation
JEL Classification: G01, G14, G21, G28
Suggested Citation: Suggested Citation