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An Examination of the Impact of the Garn-St. Germain Depository Institutions Act of 1982 on Commercial Banks and Savings and Loans


  • Millon-Cornett, Marcia H
  • Tehranian, Hassan


This paper evaluates the effects of events leading to the passage of the Garn-St. Germain Depository Institutions Act of 1982. The evidence suggests that the call for reform by President Reagan's Housing Commission and the Senate passage of the bill produced positive abnormal returns to stockholders of large savings and loans and commercial banks. Stockholders of small S&Ls and banks, on the other hand, generally experienced negative abnormal returns. Furthermore, when hopes of passage of the act faded, significant negative (positive) abnormal returns were experienced by stockholders of large (small) S&Ls and banks. Copyright 1990 by American Finance Association.

Suggested Citation

  • Millon-Cornett, Marcia H & Tehranian, Hassan, 1990. " An Examination of the Impact of the Garn-St. Germain Depository Institutions Act of 1982 on Commercial Banks and Savings and Loans," Journal of Finance, American Finance Association, vol. 45(1), pages 95-111, March.
  • Handle: RePEc:bla:jfinan:v:45:y:1990:i:1:p:95-111

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    References listed on IDEAS

    1. Newey, Whitney K., 1984. "A method of moments interpretation of sequential estimators," Economics Letters, Elsevier, vol. 14(2-3), pages 201-206.
    2. Lynge, Morgan J. & Zumwalt, J. Kenton, 1980. "An Empirical Study of the Interest Rate Sensitivity of Commercial Bank Returns: A Multi-Index Approach," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(03), pages 731-742, September.
    3. Flannery, Mark J & James, Christopher M, 1984. " The Effect of Interest Rate Changes on the Common Stock Returns of Financial Institutions," Journal of Finance, American Finance Association, vol. 39(4), pages 1141-1153, September.
    4. George G. Kaufman, 1984. "Measuring and managing interest rate risk: A primer," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jan, pages 16-29.
    5. Thomson, James B, 1987. "The Use of Market Information in Pricing Deposit Insurance," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(4), pages 528-537, November.
    6. Edward J. Kane, 1985. "The Gathering Crisis in Federal Deposit Insurance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611856, July.
    7. Buser, Stephen A & Chen, Andrew H & Kane, Edward J, 1981. "Federal Deposit Insurance, Regulatory Policy, and Optimal Bank Capital," Journal of Finance, American Finance Association, vol. 36(1), pages 51-60, March.
    8. Brickley, James A. & James, Christopher M., 1986. "Access to deposit insurance, insolvency rules and the stock returns of financial institutions," Journal of Financial Economics, Elsevier, vol. 16(3), pages 345-371, July.
    9. Lloyd, William P. & Shick, Richard A., 1977. "A Test of Stone's Two-Index Model of Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(03), pages 363-376, September.
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    Cited by:

    1. Bittlingmayer, George & Hazlett, Thomas W., 2000. "DOS Kapital: Has antitrust action against Microsoft created value in the computer industry?," Journal of Financial Economics, Elsevier, vol. 55(3), pages 329-359, March.
    2. Kutan, Ali M. & Muradoglu, Gulnur, 2014. "Investor wealth, the IMF, and the Asian crisis," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 130-137.
    3. Spiegel, Mark M. & Yamori, Nobuyoshi, 2003. "The impact of Japan's financial stabilization laws on bank equity values," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 263-282, September.
    4. repec:eee:jbfina:v:86:y:2018:i:c:p:204-223 is not listed on IDEAS
    5. Pennathur, Anita & Smith, Deborah & Subrahmanyam, Vijaya, 2014. "The stock market impact of government interventions on financial services industry groups: Evidence from the 2007–2009 crisis," Journal of Economics and Business, Elsevier, vol. 71(C), pages 22-44.
    6. Dumontaux, Nicolas & Pop, Adrian, 2013. "Understanding the market reaction to shockwaves: Evidence from the failure of Lehman Brothers," Journal of Financial Stability, Elsevier, vol. 9(3), pages 269-286.
    7. David A. Carter & Daniel A. Rogers & Betty J. Simkins & Stephen D. Treanor, 2013. "Does hedging reduce economic exposure? Hurricanes, jet fuel prices and airlines," Chapters,in: Handbook of Research Methods and Applications in Empirical Finance, chapter 14, pages 341-354 Edward Elgar Publishing.
    8. Fung, Simon Y.K. & Gul, Ferdinand A. & Radhakrishnan, Suresh, 2015. "Corporate political connections and the 2008 Malaysian election," Accounting, Organizations and Society, Elsevier, vol. 43(C), pages 67-86.
    9. Bongini, Paola & Nieri, Laura & Pelagatti, Matteo, 2015. "The importance of being systemically important financial institutions," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 562-574.

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