Impact of Deposit Rate Deregulation in Hong Kong on the Market Value of Commercial Banks
FRB of San Francisco Working Paper No. 2001-11
HKIMR Working Paper No. 10/2000
33 Pages Posted: 10 May 2005
This paper examines the effects of deposit rate deregulation in Hong Kong on the market value of banks. The release of the Consumer Council's Report in 1994 recommending interest rate deregulation is found to produce negative abnormal returns, while the announcement in 1995 terminating the deregulation program led to positive abnormal returns. Furthermore, news about resumption of interest rate deregulation in 1998 and the official announcement in 2000 to abolish the interest rate rules produced negative abnormal returns. The evidence suggests that Hong Kong banks earned rents from deposit rate restrictions and that relaxation of rate ceilings reduced these rents.
Keywords: Deposit rate deregulation, Interest rate rules, Hong Kong banks
JEL Classification: G21, G28
Suggested Citation: Suggested Citation