The value of being systemically important: event study on regulatory announcements for banks

Jacob Kleinow, Tobias Nell, Silvia Rogler and Andreas Horsch

Applied Financial Economics, 2014, vol. 24, issue 24, 1585-1604

Abstract: It is assumed that the awarding of a 'systemic importance' seal by the regulator has a positive effect on the equity value of its holder. By employing an event study analysis on a new set of regulatory announcements, we find that financial market participants react to these announcements which are, in effect, judgements that a certain credit institution is systemically important. However, the stock returns found for the respective banks are not exclusively positive; a phenomenon for which we provide explanations. Furthermore, our results show that market reactions on the most present event are weakest, indicating that the announcements' informational value to market participants diminished.

Date: 2014
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DOI: 10.1080/09603107.2014.925055

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