Deposit Insurance and the Stock Market: Evidence from Denmark

Glenn Boyle, Jan Bartholdy and Roger Stover

No 18973, Working Paper Series from Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation

Abstract: Previous studies of the relationship between deposit insurance and bank market values have usually been limited to consideration of minor changes in bank regulations but the 1987 initiation of deposit insurance in Denmark permits examination of a potentially major policy shift. We find that the market values of large Danish banks exhibited a modest positive reaction to the announcement of insurance but that small risky banks responded negatively. These results partially contrast with those previously found for the United States an outcome that seems likely to reflect the interaction of deposit insurance with the particular characteristics of the pre-existing Danish regulatory system.

Date: 2004
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Journal Article: Deposit insurance and the stock market: evidence from Denmark (2004)
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