EconPapers    
Economics at your fingertips  
 

Can Market Actors Help Monitor European Banks?

Anissa Naouar ()
Additional contact information
Anissa Naouar: Banque of France

Frontiers in Finance and Economics, 2010, vol. 7, issue 2, 138-182

Abstract: This paper focuses on the use of equity market information for the monitoring of European banks. To this end, we conduct two event studies: 1) whether equity market variables can in a timely manner anticipate changes with a constructed rating- proxy of the supervisory rating- named ‘Financial Situation Evaluation’ (FSEvaluation), for audited banks, 2) whether Rating Agencies (RAs) can help monitor European banks during the period 1990- 2006. Results show that equity market returns help to anticipate, several quarters in advance, a balance-sheet-based evaluation. However, they issue a counterintuitive signal when European banks are facing a negative evaluation of their risk and/or capital position. RAs have an additional role especially effective in summarising positive information. However, RAs are shown to take time to downgrade banks. Finally, results find evidence that investors' behaviour is, at least in part, encouraged by a “too big to fail” policy from which large European banks benefit.

Keywords: Equity market information; rating agencies; event study; Bank monitoring (search for similar items in EconPapers)
JEL-codes: G14 G18 G21 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.ffe.esc-lille.com/papers/Vol7-2ms182Naouar.pdf (application/pdf)

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: https://EconPapers.repec.org/RePEc:ffe:journl:v:7:y:2010:i:2:p:138-182

Access Statistics for this article

Frontiers in Finance and Economics is currently edited by Ephraim Clark

More articles in Frontiers in Finance and Economics from SKEMA Business School
Series data maintained by Sophie Bodo (). This e-mail address is bad, please contact .

 
Page updated 2017-09-29
Handle: RePEc:ffe:journl:v:7:y:2010:i:2:p:138-182