Intra-industry contagion effects of earnings surprises in the banking sector

Marcel Prokopczuk ()

Applied Financial Economics, 2010, vol. 20, issue 20, 1601-1613

Abstract: In this article we investigate whether contagion is present in the banking sector by analysing how banks are affected by negative earnings surprises from their competitors. The banking sector is of crucial importance for the economy and, thus, highly regulated on an individual bank level. However, a high degree of contagion risk should call for a regulation of the financial network rather than solely regulating on an individual level. To be able to make a judgement about the magnitude of possible contagion effects we compare the results of the banking sector with the results of the nonbanking industries. We find that earnings surprises cause significant contagion in the banking sector. In contrast, we do not find this effect in the nonbanking sectors, including the insurance sector. The magnitude of contagion in the banking sector is positively related with the size of the bank reporting an earnings surprise, as well as the size of the affected banks.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09603107.2010.508718 (text/html)
Access to full text is restricted to subscribers.

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:taf:apfiec:v:20:y:2010:i:20:p:1601-1613

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603107.2010.508718

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().