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Systemic Effects of Bank Equity Issues: Competition, Stabilization and Contagion

Author

Listed:
  • Valeriya Dinger

    () (University of Osnabrueck, Rolandstr. 8, DE and University of Leeds)

  • Vlad Marincas

    (University of Osnabrueck, Rolandstr. 8, DE and University of Leeds)

  • Francesco Vallascas

    (University of Leeds, Maurice Keyworth Building, Leeds LS2 9JT, UK)

Abstract

We evaluate the abnormal returns of issuing and non-issuing banks around the announcement of Seasoned Equity Offerings (SEOs) and explore how the market reaction is influenced by aggregate systemic conditions and by the systemic risk contribution and exposure of banks. While we find evidence of negative abnormal returns for issuers, non-issuing banks benefit from positive abnormal returns around the SEO announcement. We show that these positive returns are not entirely explained by the competition channel, which has been well documented for non-financial firms. In contrast, we demonstrate that they also depend on a so far undocumented system-stabilizing channel. Furthermore, under certain circumstances, the system-stabilizing channel contributes to mitigating the negative reaction to SEO announcements for the issuing banks.

Suggested Citation

  • Valeriya Dinger & Vlad Marincas & Francesco Vallascas, 2018. "Systemic Effects of Bank Equity Issues: Competition, Stabilization and Contagion," Working Papers 111, Institute of Empirical Economic Research, Osnabrueck University.
  • Handle: RePEc:iee:wpaper:wp111
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    SEOs; Banking Regulation; Banking Crises; Contagion; Systemic Risk;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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