Banks and Financial Crises: Market Valuation of the Nobel Prize in Economic Science 2022

39 Pages Posted: 10 Jul 2024

See all articles by Carlos Fernandez

Carlos Fernandez

Oviedo University - School of Economics and Business

Víctor M. González

Universidad de Oviedo - Facultad de Economicas

Shams Pathan

University of Newcastle - Newcastle University Business School

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Abstract

Ben Bernanke, Douglas Diamond, and Philip Dybvig received the 2022 Nobel Memorial Prize in Economic Sciences for their work in preventing bank collapses. We investigate the cumulative abnormal stock returns of US and European banks around the announcement, analyzing shareholder wealth impact. We find a significant positive wealth effect. The positive effect is particularly pronounced for US banks, riskier banks, and those with higher charter values—banks more likely to receive bailouts. Our findings suggest bank shareholders believe they will benefit from the economists' advocacy for public bailouts of distressed banks.

Keywords: Nobel Prize in Economic Science, bank bailouts, event study, bank risk, charter value.

Suggested Citation

Fernandez, Carlos and González, Víctor M. and Pathan, Shams, Banks and Financial Crises: Market Valuation of the Nobel Prize in Economic Science 2022. Available at SSRN: https://ssrn.com/abstract=4890409 or http://dx.doi.org/10.2139/ssrn.4890409

Carlos Fernandez

Oviedo University - School of Economics and Business ( email )

Campus del Cristo, s/n
Oviedo, Asturias 33071
Spain

Víctor M. González (Contact Author)

Universidad de Oviedo - Facultad de Economicas ( email )

Campus del Cristo, s/n
Oviedo, Asturias 33071
Spain
+34 985 10 28 26 (Phone)

Shams Pathan

University of Newcastle - Newcastle University Business School ( email )

5 Barrack Road
Frederic Douglass Centre
NEWCASTLE UPON TYNE, NE4 5TG
United Kingdom

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