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, judgments 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