Surprised or not surprised? The investors' reaction to the comprehensive assessment preceding the launch of the banking union

Carboni, Marika, Fiordelisi, Franco, Ricci, Ornella and Stentella Lopez, Francesco Saverio (2017) Surprised or not surprised? The investors' reaction to the comprehensive assessment preceding the launch of the banking union. Journal of Banking & Finance, 74 . pp. 122-132. ISSN 0378-4266 (doi:10.1016/j.jbankfin.2016.11.004)

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Abstract

Did the Comprehensive Assessment (CA), preceding the Single Supervisory Mechanism (SSM) launch in Europe, achieve its aims of producing new valuable information for the market? We show that the CA achieved the goal of increasing transparency: investors were able to detect weak banks at the announce- ment of the procedure (23rd October 2013), but gained full information on the amount of the capital shortfall only at the disclosure of the results (26th October 2014). Furthermore, at the official launch of the SSM (4th November 2014), banks under direct European Central Bank (ECB) supervision registered a more negative market reaction with respect to banks maintaining their national supervisors. Using a regression model including possible confounders and allowing for treatment effect heterogeneity, this negative reaction is confirmed. These findings suggest that, at least in the short run, investors penalized banks subject to direct ECB supervision, probably because of the fear of regulatory inconsistencies.

Item Type: Article
Research Areas: A. > Business School > Accounting and Finance
Item ID: 24861
Notes on copyright: © 2016. This author's accepted manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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Depositing User: Franco Fiordelisi
Date Deposited: 30 Aug 2018 11:49
Last Modified: 13 Aug 2019 16:41
URI: https://eprints.mdx.ac.uk/id/eprint/24861

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