the international debt crisis and bank loan loss reserve decisions the signaling content of partially anticipated events the huge increases in loan loss provisions by major bank holding companies bhcs in 1987 were a signal of impending asset writedowns of loans to less developed countries ldcs 1 since loan loss reserve decisions like asset write downs are simply bookkeeping adjustments significant market reactions to such announcements should not be expected strong and meyer 1987 however found a positive and statistically significant cumulative average residual after the announcement of asset write downs 2 thakor 1987 argues that write downs have a price effect not because they mean much by themselves but because they signal events to come specifically he sees write downs as a signal of economic value enhancing corporate restructuring to come in the future p 662 we use event study methods to examine security returns for the twenty five largest u s bank holding companies surrounding citicorp s 3 billion loan loss

joint effects of interest rate deregulation and capital requirements on optimal bank portfolio adjustments the 1980 depository institution deregulation and monetary control act didmca mandates that regulation q be phased out by 1986 with deregulation of interest rate ceilings the cost of raising capital funds for commercial banks would become more volatile and more closely related with interest rates in the money and capital markets thus value maximizing bank managers would need to be concerned not only with the internal risk but also with the external risk in bank portfolio management decisions based upon the cash flow version of the capital asset pricing model this paper analyzes the joint impact of interest rate deregulation and capital requirements on the portfolio behavior of a banking firm the 1980 depository institution deregulation and monetary control act didmca mandates that regulation q be phased out by 1986 with deregulation of interest rate ceilings the cost of raising capital funds for commercial banks would become more volatile and more correlated with interest rates in the money and capital markets the bank s cash profit would be more dependent on the interest rate fluctuation ceteris paribus thus the value of a banking firm would also be more dependent on the correlation of the banking firm s cash profit with that of the external market ceteris paribus therefore as deregulation continues a value maximizing bank manager would need to be concerned not only with variance and covariances among the returns on bank assets but also with covariances between rates on bank assets and liabilities as well as that in the external markets study of portfolio behavior of a banking firm should distinguish between the impact of internal risk and external risk on firm value furthermore with interest rate deregulation and the ensuing interactions among various risks banks may also react differently to capital regulation imposed by the regulatory agency despite numerous studies on regulation of bank capital the joint effects of interest rate deregulation and capital requirements on bank

a new approach for controlling a hybrid stochastic manufacturing remanufacturing system with inventories and different leadtimes this paper addresses the control problem of a stochastic recovery system with two stocking points and different leadtimes for production and remanufacturing for such systems the optimal control policy for a linear cost model is not known therefore in the literature several heuristic policies are investigated and analyzed in this paper a new approach is provided which differs substantially from the existing ones instead of using one inventory position for the production and remanufacturing decisions we base the decisions on two aggregate variables which are defined different for different leadtime relations by means of numerical examples we illustrate that system performance measured in average costs per time unit can be improved substantially by our new approach especially for large leadtime differences

market based empirical research in accounting a review interpretation and extension a decade and a half of the most concerted and ambitious research effort in accounting history is evaluated here it is the search into the relationship between publicly disclosed accounting information and the consequences of the use of this information by the major group of usersequity investors as such consequences are reflected in characteristics of common stocks traded in major exchanges this research effort known as market based accounting research mbar obtained its impetus from major developments in finance theory during the late 1950s and early 1960s these were the portfolio selection theory and its offspring the capital asset pricing model capm and the concept of informationally efficient capital markets ecm subsequent developments in information economics agency theory and optimal incentive signaling models were quickly incorporated into mbar while the impetus to this line of research came from other disciplines accounting was not only a beneficiary but also to a modest extent a benefactor mbar is relevant to the study of capital market efficiency the capm information economics and regulation this contribution distinguishes mbar from most accounting areas whose contributions to other disciplines are negligible in

accounting for retail land sales analysis of a mandated change abstract this study assesses the stock market s reaction to a series of events leading up to a mandated change in accounting for retail land sales evidence is found to support the conclusion that the market reacted to some of these events in a manner consistent with the effects of the accounting change on debt annagement contracts a distinctive aspect of the analysis is the efficient use of security returns data to detect market reactions and to derive empirical distributions of test statistics employed the analysis is extended by a model for grouping regression equations known as seemingly unrelated regressions however the gains from this extension are modest

measuring the effects of regulation with stock price data this article examines the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources e g the wall street journal are used to choose announcement dates twenty major changes in regulatory constraint since 1887 are considered tests using either monthly or daily data are found to have surprisingly little ability to detect the effects of regulation the evidence shows that formal regulatory announcements are generally anticipated in cases where it is unclear when expectations change

the market valuation effects of reserve regulation abstract we demonstrate that the financial market s reaction to changes in reserve regulation implies that reserve requirements are an excise tax on banking activities changes in reserve requirements do not influence yields on treasury securities or returns on broad based portfolios of nonfinancial stocks and thus do not impound new information about monetary policy moreover changes in reserve requirements have an impact on nonbank financial firms that is opposite in sign to that of banks this suggests that reserve requirements shift the locus of some financial activities from the banking sector to the nonbank sector of the financial system

syndicated loan announcements and the the market value of the banking firm this paper examines valuation effects on the stocks of fifteen participating money center banks of 774 announcements of syndicated loans representing announcements of investment decisions for the lenders the authors find that announcements of ldc loans in the 1970s especially those to latin american borrowers are associated with negative abnormal returns to the lending banks while announcements of loans to u s corporate borrowers in the 1980s especially those for takover finance are associated with positive abnormal returns while a number of testable predictions are consistent with the negative abnormal returns for latin american loans they explain response to takeover loans with a return to liquidity hypothesis copyright 1995 by ohio state university press

bank foreign lending mandatory disclosure rules and the reaction of bank stock prices to the mexican debt crisis this paper examines the effects of the mexican debt mora torium in august 1982 on bank valuation the mexican default resulted in the passage of regulations requiring public disclosure of bank fo reign lending exposure the authors find that even in the absence of public disclosure regulations investors were able to discriminate a mong banks with different levels of exposure copyright 1987 by the university of chicago

market expectations of the effects of the tax reform act of 1986 on banking organizations abstract this study investigates market expectations regarding the effect of the tax reform act of 1986 on the banking industry the evidence shows that overall the tax reform did not adversely affect the stocks of banking institutions the findings suggest that overall banking organizations were expected to largely mitigate any negative effects of the tax reform on their cash flow by rebalancing and or repricing their portfolios of assets and liabilities the most significant provision of the new act was the limitation on foreign tax credits interestingly the markets did not expect any adverse valuation effects from the recapture of loan loss reserves or the elimination of the interest deductibility for carrying tax exempt securities

life cycle inventory policy characterizations for a single product recoverable system abstract this paper investigates the optimal inventory policies over the life cycle of a remanufacturable product the product is produced through manufacturing or remanufacturing benefiting from the long run optimal policies found through markov decision analysis the optimal or near optimal policy characterizations with practical structure are determined for every life cycle stage under several setup cost configurations the effects of changes in the demand and return rates on the optimal inventory policies are investigated through these policies further a performance comparison with a pull strategy is provided the performance of these long run policies is evaluated as well in a finite horizon setting and the importance of frequent policy revision over the product life cycle is illustrated numerically

market evidence on the effective maturity of bank assets and liabilities the recent years increase in interest rate volatility has intensified concern over the exposure of commercial banks to interest rate or funding risk since the effect of interest rate changes on the equity value of a bank depends on the maturity or duration of the bank s assets and liabilities assessing an individual bank s interest rate risk exposure requires information about the maturity composition of its portfolio it is difficult however to assess a bank s risk exposure from balance sheet data because several important asset and liability items have theoretically ambiguous effective maturities in a frictionless market a security s effective maturity will equal its stated maturity or time to repricing with market imperfections e g depositors transaction or information costs however the equilibrium cost of some deposit items may respond sluggishly or incompletely to market rate changes see hester and pierce 1975 or flannery 1982 such liabilities market values discounted at market rates would therefore fluctuate with the level of interest rates these liabilities are sometimes called core deposits which manifest sticky responses to market rate changes we define an asset or liability s effective maturity as the maturity of a fixed rate perfectly elastically supplied security with the same market value elasticity as the bank balance sheet item under consideration naturally a balance sheet item s effective maturity is the relevant determinant of its contribution to the bank s overall interest rate risk sensitivity

an investigation of lead time effects in manufacturing remanufacturing systems under simple push and pull control strategies in this paper we extend the push and pull control strategies defined by van der laan et al e a van der laan m salomon r dekker production planning and inventory control for remanufacturable durable products working paper 9531 a econometric institute erasmus university rotterdam the netherlands 1995 to evaluate numerically the effects of lead time duration and lead time variability on total expected costs in production inventory systems with remanufacturing although both strategies are non optimal they are relatively easy to analyse numerically and more importantly they are actually used in practice the most important outcomes of the study are that for both control strategies i manufacturing lead times have a larger influence on system costs than remanufacturing lead times ii a larger remanufacturing lead time may sometimes result in a cost decrease and iii a larger variability in the manufacturing lead time may sometimes result in a cost decrease

market reaction to the thrift bailout abstract this paper examines the share price reaction of depository institutions to the financial institutions reform recovery and enforcement act firrea passed august 1989 we find a favorable share price response for thrifts which could be attributed to enhanced depositor confidence reduced risk premiums on deposits reduced agency costs or reduced loan losses among other reasons however the effects of firrea on commercial banks were negligible an intra industry analysis revealed that the variation in share price responses could not be explained by cross sectional differences in thrift capital levels

tail risk and systemic risk of us and eurozone financial institutions in the wake of the global financial crisis we evaluate multiple market based measures for us and eurozone individual bank tail risk and bank systemic risk we apply statistical extreme value analysis to the tails of bank equity capital losses to estimate the likelihood of individual institutions financial distress as well as individual banks exposure to each other spillover risk and to global shocks extreme systematic risk the estimation procedure presupposes that bank equity returns are heavy tailed and tail dependent as identifying assumption using both us and eurozone banks allows one to make a cross atlantic comparison of tail risks and systemic stability we also assess to what extent magnitudes of tail risk and systemic risk have been altered by the global financial crisis the results suggest that both tail risk and systemic risk in the us are higher than in the eurozone regardless of the considered sample period

a note on the stock market effects of the adoption of risk based capital requirements on international banks in different countries abstract the present note provides empirical evidence on the relative competitive effects of the adoption of risk based capital requirements on large international banks in the u s canada u k and japan a two index regression model is used to calculate prediction errors in periods with numerous announcements concerning the new capital rules including the basle conference we find significant declines in equity returns for u s canadian and u k banks in response to news announcements with u s bank stocks exhibiting the largest negative reaction for japanese banks the equity return results are mixed which may be due to uncertainty among investors regarding the handling of their sizeable hidden reserves under the new risk adjusted capital rules

prospects for the eurozone for wim duisenberg the euro s perceived independence from the nation state was a path breaking achievement to be proud of and to cherish little more than a decade later and three years into the deepest economic crisis europe has known since the great depression duisenberg s elation rings strangely anachronistic since what the nationless euro seems to have achieved above all is to undermine whatever mutual confidence at the heart of our community there may have been at the start this special issue takes stock of the euro crisis so far it is concerned with the in depth analysis of its main causes policy proposals for a recovery from the crisis and reform strategies for the reconstruction of a more viable and egalitarian eurozone in the future this introduction provides an overview of both core features of the euro crisis and related debates as well as individual contributions to this special issue section 1 examines the origins of the euro crisis section 2 reviews key policy developments in the evolution of the crisis from its onset in may 2010 to the adoption of outright monetary transactions omts by the european central bank ecb in september 2012 and section 3 provides an overview of the contributions to the special issue

the wealth effects of the risk based capital requirement in banking the evidence from the capital market abstract the imposition of risk based capital requirements has been advocated by some regulatory authorities as a means of mitigating the incentive problems created by fixed premium deposit insurance however their imposition also constitutes a requirement to maintain an exogenously influenced capital structure which may adversely affect the values of the firms involved this paper examines the wealth effects of the announcement of the basle committee s intention to impose across international boundaries a pre determined minimum level of risk adjusted capital we find that in general the equity values of a sample of large publicly traded banks decrease at the time of the announcement further those banks with capital levels which are deficient relative to the mandated levels suffer the largest relative losses

an examination of the impact of the garn st germain depository institutions act of 1982 on commercial banks and savings and loans this paper evaluates the effects of events leading to the passage of the garn st germain depository institutions act of 1982 the evidence suggests that the call for reform by president reagan s housing commission and the senate passage of the bill produced positive abnormal returns to stockholders of large savings and loans and commercial banks stockholders of small s ls and banks on the other hand generally experienced negative abnormal returns furthermore when hopes of passage of the act faded significant negative positive abnormal returns were experienced by stockholders of large small s ls and banks this study examines the impact of the passage of the garn st germain depository institutions gsgdi act of 1982 on commercial bank and savings and loan stockholder returns the gsgdi act represents one of two major revisions of the financial system over the last twenty years the other being the depository institutions deregulation and monetary control act of 19801 the proposal for such a change reflected the growing inadequacy of the regulatory structure of financial institutions to adapt to rapid changes in technology shifting consumer demands for financial services and extremely volatile interest rates efforts to reform the financial system resulted in passage of the gsgdi act of 1982 which included provisions seeking to improve both the implementation of monetary policy and the degree of equity in the regulation of financial institutions such improvements were intended to reduce the operational and financial risk of financial institutions a central issue in the economics of regulation is whether regulatory actions benefit the economic agents they are intended to benefit a large body of literature exists which examines the economic effects of regulation much of this literature has utilized the concepts and methods of welfare economics to assess the extent

federal deposit insurance regulatory policy and optimal bank capital this paper seeks to explain the combination of explicit and implicit pricing for deposit insurance employed by the fdic essentially the fdic sells two products insurance and regulation to span the product space it must and does set two prices we argue that the need to establish regulatory disincentives to bank risk taking is the heart of the controversy over the adequacy of bank capital and that the ability to close risky banks before exhausting their charter value i e the value of their right to continue in business stands at the center of these disincentives and in front of the fdic s insurance reserves just as a book shouldn t be judged by its cover a government agency shouldn t be judged by the words behind its initials with the fdic federal deposit insurance corporation the agency s name describes only part of its formal operations the fdic is quasi governmental has a regional structure and sells deposit insurance however the initials fail to convey the fdic s critical place in the governmental regulatory structure as the sole federal overseer of the approximately 8900 state chartered commercial banks that have chosen not to belong the federal reserve system reflecting the federal reserve s membership problem the number of these banks is growing year by year besides selling deposit insurance at bargain explicit rates the fdic performs four regulatory functions 1 entry regulation it passes on new banks applications for deposit insurance and on branch and merger proposals as well thereby protecting the value of existing bank charters 2 examination two thirds of fdic employees are concerned with inspecting bank records and supervising managerial activity 3 regulation of deposit rates and conditions for withdrawal by tradition fdic policies on these matters conform entirely with regulations applicable to federal reserve member banks and 4 disposition of failed banks when an insured bank fails the fdic usually chooses not to liquidate it 2

regional reciprocal interstate banking the supreme court and the resolution of uncertainty abstract in 1985 the supreme court affirmed the ability of the states to enter into regional reciprocal compacts in northeast bancorp inc et al v board of governors of the federal reserve system the current study tests the hypotheses that the court s decision exerted a material influence on the wealth of shareholders in bank holding companies bhcs operating within regional banking compacts and that shareholder reactions were affected by the size of their bhc as a proxy for the likelihood that a bhc would be an acquiror vs a target in the new legislative climate the analysis uses a sample of 52 bhcs that were members of regional interstate banking compacts and a control sample of 107 bhcs based in states that had not passed such enabling legislation as of the event date both portfolios of bhcs exhibited a statistically significant average positive reaction to the supreme court decision further there is evidence that the average bhc in each group reacted significantly differently to that event the reactions of bhcs in regional compacts were associated negatively with their relative size within their respective regional compact but related positively to their absolute size interestingly the reactions of bhcs in the control sample were also negatively associated with their relative size within their home office s state but also positively related to their absolute size all in all shareholders viewed the interstate banking opportunities brought by the supreme court decision to be consistent with their interests

the reaction of bank stock prices to the international debt crisis abstract in this paper we develop a cross sectional regression approach to estimate the impact of foreign loan exposure on the pricing of u s bank stocks a new approach is required because news about foreign loan problems may arrive incremently over time rather than reaching the market on a few specific dates the way earnings and dividend announcements do consistent with this interpretation we find that foreign loan exposure had a significant impact on the pricing of u s bank stocks during the years 1982 and 1983 but that the stock prices adjusted continually over the two year period rather than jumping on a few particular days

bank capital regulation and the valuation effects of latin american debt moratoriums abstract we examine effects of the mexican and bolivian debt moratoriums on bank share prices and analyze whether bank capital regulation influences these returns we hypothesize that investors perceived that capital deficient banks with exposure to this debt would sustain greater regulatory costs due to increased pressure from regulators to strengthen their capital bases or to reduce leverage consistent with this hypothesis we find that the impact of these debt moratoriums on bank stock returns is more unfavorable for capital deficient banks than for banks that met regulatory standards of capital adequacy

a note on deposit rate deregulation super nows and bank security returns abstract this paper empirically investigates the effects on the weekly returns of almost 100 banking organizations of the december 1982 authorization of super nows examination of excess returns around the announcement date suggests that the announcement of the super nows had a statistically significant and negative effect and that the impact differed significantly by type of bank while returns for money center banks were generally unaffected excess returns for regional retail banks were highly significant

two or three things i know about her europe in the global crisis and heterodox economics europe is in the middle of an economic and social storm although the turmoil since the mid 2008 originated elsewhere the european dynamics may turn the great recession into a full blown great depression within this dynamics the faulty design of the single currency is a key element together with the neomercantilist fracture dividing the core of northern europe and the periphery mostly composed of southern european countries the paper gives a quick reminder of what the true nature of the global crisis is section 2 the neoliberal great moderation was a paradoxical kind of financial and privatised keynesianism the heart of the anglo saxon model has been the overcoming of the stagnationist tendencies emerging from traumatised workers thanks to the transformation of manic savers into indebted consumers i will then section 3 dissect the peculiarities of the neomercantilist export led posture the eventual establishment of the euro as the single currency was in stark discontinuity with the maastricht treaty originating from the delors commission section 4 the real puzzle is to understand how the euro actually came into being from such fragile foundations and also why for many years it seemed a happy experiment the institutional setting of the eurozone and the german self defeating obsession for fiscal austerity decisively drove the area into a double dip recession a way out of the crisis section 5 requires not only monetary reforms and expansionary coordinated fiscal measures but also a wholesale change of economic model this latter must be built upon a new engine of demand and growth a monetary finance of good deficits is called for realising a radicalised socialisation of the investment a class and keynesian new deal

evidence of the impact of mandatory changes in accounting principles on corporate loan agreements abstract the theory in this paper predicts that mandatory changes in accounting princples can affect the measurement rules defined in restrictive covenants in firms lending agreements consequently those mandatory changes can have an impact on the value of a firm s equity even if the changes appear to be merely cosmetic this contracting cost theory is tested by examining of both event related and cross sectional abnormal performance of the equity of a sample of firms when the accounting princples board changes accounting princples for business combinations the theory provides at best in incomplete explanation of the observed abnormal performance

the regulation of international lending imf support the debt crisis and bank stockholder wealth abstract in a recent article cornell landsman and shapiro 1986 provide insight in to the impact of selected regulatory responses to the international debt crisis on bank stock prices the current study concentrates on the reaction of bank shareholders to the legislative events that ultimately led to the passage of the international lending supervision act ilsa and to greater u s support of the international monetary fund imf while cornell landsman and shapiro restricted their legislative analysis to when the relevant bills were passed this study also examines when such legislation was introduced in the house or the senate the empirical results indicate that the introduction of such legislation materially influenced bank stockholder expectations in contrast to cornell landsman and shapiro the effect of these events on the risk return complexion of banks is measured furthermore the sensitivity of bank stockholders reactions to the above legislative events is appraised in light of banks latin american loan portfolio risk analysis of the expected impact of greater imf support and the ilsa on bank stockholders supplements the work of cornell landsman and shapiro by providing additional insight into the expected impact of such legislation on bank industry risk unlike cornell landsman and shapiro this study provides evidence that the joint effect of a greater imf quota and the ilsa was a net benefit to stockholders analysis suggests that the perceived benefit of a greater imf quota was apparently diminished by the ilsa however stockholders evidently perceived a general decrease in the risk of the banking industry as a result of the legislative events

depositor behavior under macroeconomic risk evidence from bank runs in emerging economies depositor behavior has been associated with bank specific characteristics random runs or contagion episodes using evidence on the 2000 02 bank runs in argentina and uruguay this paper shows that macroeconomic risk is also important few macroeconomic shocks can quickly cause large runs macroeconomic risk affects deposits regardless of traditional bank specific characteristics furthermore bank exposure to macroeconomic factors can explain differences in deposit withdrawals during crises the evolution of bank specific characteristics is mainly driven by macroeconomic factors while the informational content of bank specific variables declines overall depositors seem responsive to risk in a broader sense than that often considered by the literature

the brady plan the 1989 mexican debt reduction agreement and bank stock returns in the united states and japan the authors investigate the impact of the menu approach to debt rescheduling on the market value of two major creditors u s and japanese banks they try to understand how major creditor banks are affected by debt reschedulings and the menu choices they make so that debt deals can be structured in a way that appeals to both creditors and debtor countries they measure the stock market s reaction to the announcement of the brady plan and the mexican debt reduction agreement the brady plan was implemented through the menu approach which acknowledges creditor heterogeneity and provides financing packages that meet the country s financing requirements while still allowing the banks to reduce their exposure the mexican agreement provides an opportunity to test the impact of the brady plan s implementation by examining individual bank s menu choices exposure levels and the market s reaction they explore whether banks were able to make optimal portfolio choices when confronted with the obligation to participate they show that stock prices for different groups of banks reacted quite differently to focal events among all banks u s multinationals showed the strongest positive reaction to the brady announcement and the mexican agreement u s non multinationals do not appear to have been significantly affected by these international debt related events the reaction experienced by all japanese banks was much weaker than that of u s multinationals and was negative for the brady announcement and the initial mexico announcement the authors contend that the lack of a strong reaction was because of the japanese banks relatively low exposure to developing country risk they see the negative market reaction as a reflection of the expectation that a u s initiated debt reduction strategy would not be favorable for japanese banks indeed after the menu choices were announced the market recognized that the japanese banks were treated fairly and corrected itself they do not find that banks that made different choices were treated differently by the market so banks were able to negotiate menu choices in their best interest and to make portfolio choices consistent with their business objectives the results here confirm that the menu approach to debt restructuring may benefit both the creditor banks and the debtor countries

the effect of taxes and depreciation on corporate investment and financial leverage this paper provides an analysis of the effect of corporate and personal taxes on the firm s optimal investment and financing decisions under uncertainty it extends the deangelo aad masulis capital structure model by endogenizing the firm s investment decision the authors results indicate that when investment is allowed to adjust optimally the existing predictions about the relationship between investment related and debt related tax shields must be modified in particular the authors show that increases in investment related tax shields due to changes in the corporate tax code are not necessarily associated with reductions in leverage at the individual firm level in cross sectional analysis firms with higher investment related tax shields normalized by expected earnings need not have lower debt related tax shields normalized by expected earnings unless all firms utilize the same production technology differences in production technologies across firms may thus explain why the empirical results of recent cross sectional studies have not conformed to the predictions of deangelo and masulis

bank acquisition and stockholders wealth abstract bank mergers are a control mechanism for reallocating resources because regulation has a pervasive influence on bank decision making unlike industrial firms bank mergers are subject to regulatory approval bank shareholder returns are analyzed at the time of federal reserve approval of mergers to assess whether regulation reduces differential information between bank managers and outsiders or reduces managers ability to take advantage of differential information empirical tests indicate there are negative returns to acquiring banks for external mergers but normal returns for internal mergers emergency mergers generate positive returns before and upon announcement more negative results occur in states with branching restrictions and in cases when equity financing is used

heterogeneous creditors and the market value of bank ldc loan portfolios abstract a standard proposition used in many empirical studies is that the value of an ldc loan does not depend on the identity of the lender i test this proposition using bank securities prices and prices for ldc loans trading in the secondary market i find significant cross sectional differences in the sensitivity of bank stocks to changes in the price of ldc loans differences in sensitivity appear to be related to changes in bank exposure to ldcs i also find evidence consistent with the hypothesis that cds are implicitly insured

the reaction of bank stock prices to news of derivatives losses by corporate clients abstract from march through may of 1994 several large nonfinancial firms announced millions of dollars in losses from derivatives deals especially those arranged by bankers trust accompanying these announcements and related news stories were allegations that bankers trust had either misrepresented lied or deceived its clients using sur methods we investigate how these announcements affected bankers trust and three portfolios of banks dealers nondealers and nonusers our results indicate significant cumulative abnormal returns of 12 14 bankers trust 5 56 13 dealer banks and 2 45 32 nondealer user banks the evidence suggests an intra industry information transfer effect consistent with rational pricing the replacement cost of derivative contracts is an important factor in explaining the variation in abnormal returns across banks

does financialization retard growth time series and cross sectional evidence abstractalthough financial development is essential for economic development excessive financialization of the economy is believed to exert a negative effect on output growth in this article empirical evidence is presented on the relation between economic growth and financialization as measured by the ratio of credit to gdp and the ratio of publicly traded shares to gdp the empirical results are based on annual time series data for six country groups as well as cross sectional data covering a large number of countries the model is initially specified with unobserved components and estimated in a time varying parametric framework to account for missing variables thereafter the issue of linear versus quadratic specifications is examined the results are robust with respect to model specification estimation method data type and variable definition showing in general that financialization has a negative impact on growth some evidence is also presented to support the notion of the financial kuznets

the brazilian default announcement and the contagion effect hypothesis abstract in this paper we use stocl market data to test several hypotheses regarding possible investor reaction to the february 20 1987 brazilian default both the traditional event study approach and a generalized least squares regression using brazilian exposure as an explanatory variable for abnormal returns are used a sample of 46 bank holding companies all listed on the new york or american srock exchanges is divided into groups of no low and high brazilian exposure we find that the initial stock market reaction to the default represents a rational investor response to new bank specific information however the stock market reaction also reveals that not all relevant information was contained in the disclosure announcement further we find some evidence of a contagion effect related to size

the impact of an unexpected political resignation on exchange rates based on the theory of economic regulation political shocks are examined as unexpected events in the light of the efficient markets hypothesis and a political resignation is taken as an example of such an event the hon j dawkins mp resigned as the federal treasurer of the australian government on friday 17 december 1993 there have been a number of studies on the effect of economic and political events on stock prices this study considers the impact of dawkin s resignation on the foreign exchange rates of the major traded currencies in australia the traditional event study methodology based on the market model and the lesser used multivariate methodology of seemingly unrelated regressions are used for the analysis the sample of currencies is considered both as a portfolio and on an individual basis with efficiency of the currency markets being tested for anticipatory event related and persistence effects the paper concludes by contrasting the findings of the two methodologies the study repo

does the japanese stock market price bank risk evidence from financial firm failures the ability of the japanese stock market to appropriately price the riskiness of japanese financial firms has been frequently questioned particularly in light of japan s widespread financial distress in recent years and poor disclosure requirements this paper examines the response in equity returns of japanese banks to the failure of four commercial banks and two securities firms between 1995 and 1998 using event study methodology the analysis finds that share prices of surviving banks on the whole responded unfavorably to the failures and that financially weaker survivors were more adversely affected this suggests that despite the distress and alleged opaqueness bank shareholders were able to use available indicators of financial condition both to incorporate new information quickly into stock prices and to differentiate among banks

the impact of the 1980 depository institutions deregulation and monetary control act on market value and risk evidence from the capital markets the depository institutions deregulation and monetary control act of 1980 brought about major changes in the banking industry this study employs capital market data to examine the act s impact on the relative competitive positions of distinct classes of firms within the industry the evidence supports the hypothesis that federal reserve system banks profited from the regulatory change at the expense of nonmember banks and savings and loans copyright 1988 by ohio state university press

the economic effects of client losses on otc bank derivative dealers evidence from the capital market this paper investigates the economic impact of client derivatives losses on otc derivatives dealers its focus is on the capital marketers reaction to losses suffered by four end users of otc derivatives products arranged with bankers trust new york evidence is provided on the impact of these end user losses on bankers trust itself as well as whether these losses produced any systemic or contagion effects extending to other major bank otc derivatives dealers finally the paper investigates whether possible systemic effects may be associated with bank specific characteristics such as the level of derivatives exposure counterparty risk and reliance on trading income copyright 1996 by ohio state university press

debt equity swaps regulation k and bank stock returns abstract since the early 1980s the financial health of several highly levered ldcs has become increasingly precarious their financial problems in turn imply potentially serious financial problems for their creditors foremost among whom are some of the largest banks in the american financial system in order to relieve some of the pressure on the lending firms the board of governors has recently amended regulation k which provides guidelines for international banking operations to allow for unrestricted investment in foreign nationalized firms through the mechanism of the debt equity swap this paper examines the capital market reaction to the regulatory change and we find that 1 investors on average viewed the change as a wealth increasing event 2 the magnitude of the market reaction was significant and positively related to the level of foreign lending exposure and 3 among ldc lenders the capital market reaction differed significantly between money center and non money center banks