The Collapse of the Silicon Valley Bank (Svb) and its Impact on Financial Sector Valuations

This study examines how financial sectors of 43 countries responded to the Silicon Valley Bank (SVB) failure. Findings show significant adverse reactions, with various degrees, in most countries in Africa, Europe, and North America on and around the event date. In contrast, the equity market valuations of financial sectors of countries from Asia-Pacific (except Australia and Japan Australia), Latin America, Gulf Corporation Council, and Israel were unaffected. This study further conducts a mechanism analysis using cross-sectional regressions of cumulative abnormal returns (CARs) to identify probable channels for shock transmissions from the U.S. financial sector to others. Findings show that economic sectors with high exchange rate sensitivity (local currency vis-a-vis U.S. dollar) and those with high equity correlations with the U.S. financial sector experienced higher negative market returns surrounding the SVB’s collapse. Finally, greater investor attention to SVB failure, measured by the Google Search Volume index, is a significant determinant of pre-event negative CARs. These findings have important implications for investors and policymakers