Ann Marie Whyte

Changes in market assessments of bank risk following the Riegle¿Neal Act of 1994

Abstract We examine changes in bank risk following the passage of the Riegle–Neal Act of 1994 and find a significant decline in bank risk. The extent of interstate banking activity and the status of state-level interstate banking laws are important in explaining the risk reduction. Banks with assets in multiple states experience a significant reduction in risk whereas banks with assets in one state experience no significant change in risk. Banks in states with the most restrictive interstate banking provisions experience a significant decrease in risk whereas banks in states with more liberal interstate banking provisions experience a significant increase in risk.

The Source of Gains to Targets and Their Industry Rivals: Evidence Based on Terminated Merger Proposals

We examine merger gains to targets and their industry rivals and find evidence consistent with the signaling hypothesis. We find that targets and rivals benefit from the merger announcement, but termination results in significant negative returns for targets and significant positive returns for rivals. Termination gains to rivals support the hypothesis that rival firms could become acquisition targets. The gains are positively related to subsequent acquisition activity involving the target and the extent of merger activity in the industry, and are inversely related to the relative size of the target rivals, the presence of competing bidders, and the regulatory environment.

The impact of FDICIA on bank returns and risk: Evidence from the capital markets

Abstract This study examines the impact of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991 on bank stock returns and risk. We find that FDICIA had a generally positive effect on bank stock returns and resulted in a significant reduction in bank risk. The extent of the risk reduction varies based on the capitalization, size, and credit risk of the institutions with poorly capitalized, large, and high credit risk banks experiencing the greatest risk reduction. The results obtained using two separate control groups also bolster the conclusion that FDICIA’s passage resulted in a significant decline in bank risk.

Bank failures and contagion effects: Evidence from Britain and Canada

Abstract This paper examines contagion effects of bank failures in Britain and Canada. British banks experienced no significant reaction while Canadian banks reacted negatively to failures of domestic banks. The differing reactions may be attributable to the difference in regulatory response to the failures. Results suggest that the market is more likely to react negatively when increased regulations are proposed in the wake of a failure. Furthermore, the existence of a formal deposit insurance scheme may not be enough to prevent contagion effects; the actual and perceived response of regulators to bank failures may shape the investor response.

New evidence on factors that influence the wealth effects of international joint ventures

Abstract Studies of the wealth effects of international joint ventures report mixed results. However, little work has been done to explain this enigma. We explain this riddle by identifying the factors which influence the wealth effects. Using a sample of 100 ventures that were announced between 1979 and 1994 we find that, on average, international joint ventures have virtually no immediate net impact on shareholder wealth. However, in-depth analysis reveals interesting findings that could explain why the results of previous studies are mixed. We find that the market reaction is more favorable when U.S. firms establish joint ventures in Asian countries, less favorable when the joint venture is established in lower risk developing countries, and less favorable when the joint venture is a manufacturing operation. In an increasingly globalized world, the results of this study hold important managerial implications.

Stock returns and volatility: An empirical investigation of the German and French equity markets

This paper examines the relationship between stock returns and volatility in the German and French equity markets. Under the assumption of a conditional student t density function, the results indicate that stock returns in both countries may be described by the GARCH (1,1) model. The results also provide evidence that the 1987 stock market crash affected the mean-variance relationship in both countries, and the models fit is significantly improved by explicitly taking the crash into account. Interestingly, the index of relative risk aversion is positive in both countries but is only significant in Germany when the stock market crash is incorporated into the analysis. The results also reveal that settlement delays significantly affect return in both countries and volatility in France. Furthermore accounting for structural shifts is important in ascertaining the relationship between stock returns and volatility.

Competitive and Information Effects of Cross-Border Stock Listings

We examine the effect of 269 cross-border listings on rivals in the listing and domestic markets and find that U.S. rivals experience significant gains whereas domestic rivals do not. Both competitive and information effects are important in explaining the reaction of U.S. rivals. Regarding the competitive effects, the reaction of rivals is less favorable when listings originate in developed countries and more favorable when listing firms do not have prior operating presence in the United States. Regarding the information effects, the reaction is less favorable when listings are combined with equity offerings and more favorable when the listing is the first to occur within an industry. The Southern Finance Association and the Southwestern Finance Association.

Seasonality in industry specific indices

This study examines seaonality in three industry specific stock market indices; the Standard and Poors (S&P) 20 Transportation, the S&P 40 Utilities, and the S&P 40 Financial. The results support the existence of a weekend effect in the transportation index. There is no evidence of a weekend effect in the utilities and financial indices. Both the transportation and financial indices exhibit the January effect. The utilities index, however, shows no evidence of a January effect. The finding of a weekend and a January effect at the industry level is significant because select mutual funds enhance the ability of investors to capitalize on such anomalies.

The Impact of Dealer Failures on Primary Dealers and on the Market for Repurchase Agreements

This study examines the impact of the failures of government securities dealers and the eventual passage of the Government Securities Act (GSA) of 1986 on the stock prices of primary dealers and on repo rates. Results provide evidence that several failures elicited a negative stock market reaction although the results vary based on the type of dealer. The study provides evidence that average spreads in the repo market were significantly affected by several events although the direction of the change in spread varied. Additionally, there is evidence that the events surrounding the GSAs passage had a positive impact on bank dealers and elicited a mixed reaction in the repo market.