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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.

Suggested Citation

  • Mark M. Spiegel & Nobuyoshi Yamori, 2002. "The impact of Japan’s financial stabilization laws on bank equity values," Proceedings, Federal Reserve Bank of San Francisco, issue sep.
    • Handle: RePEc:fip:fedfpr:y:2002:i:sep:x:1
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Tatsuyoshi Miyakoshi & Yoshihiko Tsukuda, 2007. "Assessments of the program for financial revival of the Japanese banks," Applied Financial Economics, Taylor & Francis Journals, vol. 17(11), pages 901-912.
    3. David C. Smith, 2002. "Loans to Japanese borrowers," Pacific Basin Working Paper Series 2002-11, Federal Reserve Bank of San Francisco.
    4. Alexander Schaefer & Isabel Schnabel & Beatrice Weder di Mauro, 2013. "Financial Sector Reform After the Crisis: Has Anything Happened?," Working Papers 1304, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 24 May 2013.

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