Economics at your fingertips  

Does liberalization reduce agency costs? Evidence from the Indian banking sector

Chinmoy Ghosh, John Harding and B.V. Phani

Journal of Banking & Finance, 2008, vol. 32, issue 3, 405-419

Abstract: On February 16, 2002, the Reserve Bank of India issued a circular that signaled a policy liberalization facilitating acquisition of private sector banks in India by foreign entities. Portfolios of private sector and nationalized banks posted significant value gains in the days surrounding the announcement. The gains by private sector banks were almost double those of nationalized banks. We further analyze the firm specific abnormal returns using cross-sectional regressions and find a significant relation between firm-specific abnormal returns and factors typically associated with a bank's potential for takeover. These results provide the first empirical support for Stulz's hypothesis that one cause of the valuation gains associated with liberalization is the expected gain from a reduction of agency costs.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

Page updated 2021-04-09
Handle: RePEc:eee:jbfina:v:32:y:2008:i:3:p:405-419