The Value of Being Systemically Important: Event Study on Regulatory Announcements for Banks

Posted: 23 Jan 2014 Last revised: 8 Dec 2015

See all articles by Jacob Kleinow

Jacob Kleinow

Freiberg University; National University of Colombia

Tobias Nell

Freiberg University of Technology

Silvia Rogler

Freiberg University of Technology

Andreas Horsch

Freiberg University

Date Written: January 22, 2014

Abstract

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

Kleinow, Jacob and Nell, Tobias and Rogler, Silvia and Horsch, Andreas, The Value of Being Systemically Important: Event Study on Regulatory Announcements for Banks (January 22, 2014). Applied Financial Economics, Vol. 24 (24), 2014, p. 1585-1604, Available at SSRN: https://ssrn.com/abstract=2383208 or http://dx.doi.org/10.2139/ssrn.2383208

Jacob Kleinow (Contact Author)

Freiberg University ( email )

Lessingstr. 45
Freiberg, 09596
Germany

HOME PAGE: http://www.tu-freiberg.de

National University of Colombia ( email )

Carrera 30 45-03
Bogota, None
Colombia

Tobias Nell

Freiberg University of Technology ( email )

Schlossplatz 1
Freiberg, 09599
Germany

HOME PAGE: http://www.tu-freiberg.de

Silvia Rogler

Freiberg University of Technology ( email )

Lessingstr. 45
Freiberg, 09596
Germany

HOME PAGE: http://tu-freiberg.de/fakult6/rechnungswesen-und-controlling

Andreas Horsch

Freiberg University ( email )

Freiberg, D-09599
Germany

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