Wealth and risk implications of the Dodd-Frank Act on the U.S. financial intermediaries
Ka Kei Chan,
Dontis-Charitos, Panagiotis and
Sotiris K. Staikouras
Journal of Financial Stability, 2017, vol. 33, issue C, 366-379
We contribute to the current regulatory debate by examining the wealth and risk effects of the Dodd-Frank Act on U.S. financial institutions. We measure the effects of key legislative events of the Act by means of a multivariate regression model using the seemingly unrelated regression (SUR) framework. Our results indicate a mixed reaction by financial institutions during the various stages of the Act’s legislative process. Further tests reveal that any positive reactions are driven by small and/or low risk institutions, while negative ones are consistent across subsets; except for investment banks. We also find market risk increases for most financial institutions that are dominated by small and/or low risk firms. The cross-section results reveal that large institutions fare better than their smaller counterparts and that large investment banks gain value at the expense of others. Overall, the Dodd-Frank Act may have redistributed value among financial institutions, while not necessarily reducing the industry’s riskiness.
Keywords: Banks; Financial institutions; Dodd-Frank Act; Event study; SUR (search for similar items in EconPapers)
JEL-codes: G21 G22 G32 G34 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:33:y:2017:i:c:p:366-379
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