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The impact of Japan’s financial stabilization laws on bank equity values

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  • Mark M. Spiegel
  • Nobuyoshi Yamori

Abstract

In the fall of 1998, two important financial regulatory reform acts were passed in Japan. The first of these acts, the Financial Recovery Act, created a bridge bank scheme and provided funds for the resolution of failed banks. The second act, the Rapid Revitalization Act, provided funds for the assistance of troubled banks. While both of these acts provided some government assistance to the banking sector, they also called for reforms aimed at strengthening the regulatory environment. ; Using an event study framework, this paper examines the evidence in equity markets concerning the anticipated impact of the regulatory reforms. Our evidence suggests that the Financial Recovery Act was expected to hurt large banks, while the anticipated impact of the act by financial strength was mixed. In contrast, the anticipated impact of the Rapid Revitalization Act was expected to be unambiguously anti-reform, as news favorable to its passage disproportionately favored large and weak Japanese banks.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal Proceedings.

Volume (Year): (2002)
Issue (Month): Sep ()
Pages:

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Handle: RePEc:fip:fedfpr:y:2002:i:sep:x:1

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References

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  15. Liang, Youguo & Mohanty, Sunil & Song, Frank, 1996. "The Effect of the Federal Deposit Insurance Corporation Improvement Act of 1991 on Bank Stocks," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 19(2), pages 229-42, Summer.
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Citations

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Cited by:
  1. Wang, Chien-An & Shen, Chung-Hua, 2012. "Decoupling the distressed banks and their clients, and coupling the distressed firms and their lending banks," Pacific-Basin Finance Journal, Elsevier, vol. 20(3), pages 483-505.
  2. David C. Smith, 2002. "Loans to Japanese borrowers," Pacific Basin Working Paper Series 2002-11, Federal Reserve Bank of San Francisco.
  3. Schäfer, Alexander & Schnabel, Isabel & Weder di Mauro, Beatrice, 2013. "Financial Sector Reform After the Crisis: Has Anything Happened?," CEPR Discussion Papers 9502, C.E.P.R. Discussion Papers.
  4. David C. Smith, 2003. "Loans to Japanese borrowers," International Finance Discussion Papers 769, Board of Governors of the Federal Reserve System (U.S.).
  5. Harada, Kimie & Ito, Takatoshi & Takahashi, Shuhei, 2013. "Is the Distance to Default a good measure in predicting bank failures? A case study of Japanese major banks," Japan and the World Economy, Elsevier, vol. 27(C), pages 70-82.
  6. Masami Imai, 2006. "The Emergence of Market Monitoring in Japanese Banks: Evidence from the Subordinated Debt Market," Wesleyan Economics Working Papers 2006-008, Wesleyan University, Department of Economics.
  7. Shimizu, Katsutoshi, 2006. "How can we effectively resolve the financial crisis: Empirical evidence on the bank rehabilitation plan of the Japanese government," Pacific-Basin Finance Journal, Elsevier, vol. 14(2), pages 119-134, April.
  8. Imai, Masami, 2007. "The emergence of market monitoring in Japanese banks: Evidence from the subordinated debt market," Journal of Banking & Finance, Elsevier, vol. 31(5), pages 1441-1460, May.
  9. Kimie Harada & Takatoshi Ito & Shuhei Takahashi, 2010. "Is the Distance to Default a Good Measure in Predicting Bank Failures? Case Studies," NBER Working Papers 16182, National Bureau of Economic Research, Inc.
  10. Smith, David C., 2003. "Loans to Japanese borrowers," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 283-304, September.
  11. Kobayashi, Takeshi & Spiegel, Mark M. & Yamori, Nobuyoshi, 2006. "Quantitative easing and Japanese bank equity values," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 699-721, December.

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