The impact of monetary policy announcements on the stock price of large European banks during the financial crisis

Ornella Ricci

Journal of Banking & Finance, 2015, vol. 52, issue C, 245-255

Abstract: Since 2007, the European Central Bank responded decisively to the challenges posed by the global financial crisis, reducing key policy interest rates to unprecedented low levels and intervening with non-standard policy measures (i.e., monetary easing and liquidity provision). This paper aims to assess the impact of ECB monetary policy announcements on the stock price of large European banks. As a first step, an event study is conducted in order to measure cumulated abnormal returns (CARs) around the announcements over June 2007–June 2013; the second step is a regression analysis aimed at identifying the determinants of CARs. Results show that banks were more sensitive to non-conventional measures than to interest rate decisions, and that the same type of intervention may have a different impact depending on the stage of the crisis. In addition, banks with weaker balance sheets and operating with high-risk were more sensitive to monetary policy interventions.

Keywords: Financial crisis; Monetary policy; Event study; Banking (search for similar items in EconPapers)
JEL-codes: E52 E58 G14 G21 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:52:y:2015:i:c:p:245-255

DOI: 10.1016/j.jbankfin.2014.07.001

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