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Too big to fail: The aftermath of Silicon Valley Bank (SVB) collapse and its impact on financial markets

Author

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  • Aharon, David Y.
  • Ali, Shoaib
  • Naved, Muhammad

Abstract

This study examines the impact of the SVB collapse on the global equity markets. Using an event study methodology, our findings indicate that equity markets, in general, responded negatively to the SVB collapse. Our in-depth regional analysis shows that capital markets in Europe, Latin America, and the Middle East and Africa experienced a significant negative response on the day of the event, and this effect continued in the aftermath of the collapse of SVB. We also document a delayed response in the Asian market, supported by the significant abnormal returns observed in the post-event days. Our findings highlight the need for both firms and investors to monitor systemic risk due to the increased connectedness of financial markets. Even though investors usually diversify their portfolios, we suggest that in the case of a major negative event, such as the SVB collapse, the expected diversification benefits may not be fully realized.

Suggested Citation

  • Aharon, David Y. & Ali, Shoaib & Naved, Muhammad, 2023. "Too big to fail: The aftermath of Silicon Valley Bank (SVB) collapse and its impact on financial markets," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001629
    DOI: 10.1016/j.ribaf.2023.102036
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    More about this item

    Keywords

    Bank run; SVB collapse; Event study; Equity markets;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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