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

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.