Does the European Financial Stability Facility Bail Out Sovereigns or Banks? An Event Study

Balint Horvath and Harry Huizinga

Journal of Money, Credit and Banking, 2015, vol. 47, issue 1, 177-206

Abstract: On May 9, 2010 euro zone countries announced the creation of the European Financial Stability Facility. This paper investigates the impact of this announcement on bank share prices, bank credit default swap (CDS) spreads, and sovereign CDS spreads. The main private beneficiaries were bank creditors. Furthermore, countries with banking systems heavily exposed to southern Europe and Ireland benefited, as evidenced by lower sovereign CDS spreads. The combined gains of bank debt holders and shareholders exceed the increase in the value of their banks’ sovereign debt exposures, suggesting that banks saw their contingent claim on the financial safety net increase in value.

Date: 2015
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https://doi.org/10.1111/jmcb.12173

Related works:
Working Paper: Does the European Financial Stability Facility bail out sovereigns or banks? An event study (2011)
Working Paper: Does the European Financial Stability Facility bail out Sovereigns or Banks? An Event Study (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:47:y:2015:i:1:p:177-206

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