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When your regulator becomes your new neighbor: Bank regulation and the relocation of EBA and EMA

Author

Listed:
  • Berninger, M.
  • Kiesel, F.
  • Schiereck, D.

Abstract

Financial services providers belong to the most intensively regulated institutions at all, and to be compliant with regulation is a challenging and expensive task for each bank. Recent research indicates that a high geographic proximity to a regulatory supervisor might increase the monitoring intensity and therefore harm the shareholder wealth of monitored institutions. The announced relocation of the European Banking Authority (EBA) from London to Paris offers a natural experiment to test the effect of geographically close regulation on the market value of financial institutions. Our results show that the EBA relocation indeed induced negative abnormal stock returns for French banks. Additionally, we document that this is a bank specific effect. The parallel relocation decision of the European Medicines Agency (EMA) to Amsterdam does not result in abnormal returns of Dutch pharmaceutical corporations. Obviously, a relationship between distance and intensified monitoring exists for banks but not for pharmaceuticals.

Suggested Citation

  • Berninger, M. & Kiesel, F. & Schiereck, D., 2018. "When your regulator becomes your new neighbor: Bank regulation and the relocation of EBA and EMA," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 95382, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:95382
    DOI: 10.1016/j.econlet.2018.03.023
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/95382/
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    Cited by:

    1. Huang, Jin & Lin, Xiangyu & Shi, Xiaomeng & Zhang, S. Sarah, 2025. "Market pressure or regulatory pressure? U.S. small bank pre-emptive IT investment to data privacy regulation," Journal of Corporate Finance, Elsevier, vol. 95(C).
    2. Ni, Kejin & Zhang, Rui & Tan, Lei & Lai, Xiaobing, 2024. "How ESG enhances corporate competitiveness: Mechanisms and Evidence," Finance Research Letters, Elsevier, vol. 69(PB).

    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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