The stock market reaction to the public announcement of a supranational list of too-big-to-fail banks during the financial crisis
Abreu, Filipe José Gulamhussen, Azzim
Abreu, Filipe José
Gulamhussen, Azzim
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Publication Type
Journal article
Editor
Supervisor
Publication Year
2013
Journal
Journal of International Financial Markets, Institutions and Money
Book
Publication Volume
25
Publication Issue
July
Publication Begin page
49
Publication End page
72
Publication Number of pages
Collections
Abstract
In the aftermath of the global financial meltdown, regulators initiated a process to strengthen the regulation of too-big-to-fail (TBTF) banks with two goals: first, to increase the ability of these banks to absorb future financial shocks and second, to weaken the market expectation of public support for these banks in the event of a future financial crisis, thereby reducing the moral hazard problem associated with TBTF banks. We use an event study approach to analyze the market reaction to the official designation of a list of banks as TBTF by the Financial Stability Board (FSB) (on November 4, 2011). We do not find abnormal returns surrounding the FSB public announcement, which indicates that identifying the TBTF banks did not reduce the moral hazard problem.
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Keywords
Accounting & Finance, Financial Services & Insurance