Can Market Actors Help Monitor European Banks?
AbstractThis paper focuses on the use of equity market information for the monitoring of European banks. To this end, we conduct two event studies: 1) whether equity market variables can in a timely manner anticipate changes with a constructed rating- proxy of the supervisory rating- named ‘Financial Situation Evaluation’ (FSEvaluation), for audited banks, 2) whether Rating Agencies (RAs) can help monitor European banks during the period 1990- 2006. Results show that equity market returns help to anticipate, several quarters in advance, a balance-sheet-based evaluation. However, they issue a counterintuitive signal when European banks are facing a negative evaluation of their risk and/or capital position. RAs have an additional role especially effective in summarising positive information. However, RAs are shown to take time to downgrade banks. Finally, results find evidence that investors' behaviour is, at least in part, encouraged by a “too big to fail” policy from which large European banks benefit.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by SKEMA Business School in its journal Frontiers in Finance and Economics.
Volume (Year): 7 (2010)
Issue (Month): 2 (October)
Contact details of provider:
Web page: http://www.ffe.esc-lille.com
Equity market information; rating agencies; event study; Bank monitoring;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sophie Bodo).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.