What Determines Bank Stock Price Synchronicity?: Global Evidence

50 Pages Posted: 14 Oct 2016

See all articles by Bill B. Francis

Bill B. Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Liang Song

affiliation not provided to SSRN

Bernard Yin Yeung

National University of Singapore - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: 2012

Abstract

This paper examines what institutional and bank-specific factors determine bank stock price synchronicity. Using data on 37 countries from 1996-2007, we find that bank stocks are more aligned with the whole market (1) during the financial crisis; (2) in countries that have more credit provided by banks; (3) in countries that do not have explicit depository insurance; and (4) in countries that have lower bank-level disclosure. The results hold for both emerging and developed economy subsamples. Furthermore, in emerging economies, bank stocks in countries with higher degree of state-owned bank are more synchronized with the whole market, similarly, in developed markets, lower banking freedom enhances bank stock price synchronicity. Finally, the effects of state ownership, protection of property rights, and bank size are all more pronounced when determining bank stock price synchronicity during the financial crisis period.

Keywords: stock price synchronicity; financial crisis, bank ownership; deposit insurance; banking freedom; bank disclosure

JEL Classification: G12, G14, G15, G21, G38, N20

Suggested Citation

Francis, Bill B. and Hasan, Iftekhar and Song, Liang and Yeung, Bernard Yin, What Determines Bank Stock Price Synchronicity?: Global Evidence (2012). Bank of Finland Research Discussion Paper No. 16/2012; Gabelli School of Business, Fordham University Research Paper No. 2852332. Available at SSRN: https://ssrn.com/abstract=2852332

Bill B. Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management ( email )

Troy, NY 12180
United States

Iftekhar Hasan (Contact Author)

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Liang Song

affiliation not provided to SSRN

Bernard Yin Yeung

National University of Singapore - Business School ( email )

15 Kent Ridge Drive
BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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