Regulation of Deposit-Taking Institutions: Price Effect at Disclosures of New Regulations
This paper presents findings on the impact of revisions to a unique bank regulation yet studied. An old hypothesis in banking literature is tested by examining share price reactions to two-way changes to statutory reserve ratio (SRR) requirement over a recent eight-year period. Announcements of thes...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Universiti Utara Malaysia
2006-01-01
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| Series: | The International Journal of Banking and Finance |
| Subjects: | |
| Online Access: | https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8350 |
| Summary: | This paper presents findings on the impact of revisions to a unique bank regulation yet studied. An old hypothesis in banking literature is tested by examining share price reactions to two-way changes to statutory reserve ratio (SRR) requirement over a recent eight-year period. Announcements of these regulatory changes appear to lead to statistically and economically significant abnormal returns. These new findings suggest that a decrease in statutory reserve has a risk-reducing effect on financial institutions. Thus, this study provides a test of the prediction of theory that SRR is a powerful macroeconomics policy tool to revive an economy in the aftermath of a financial crisis.
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| ISSN: | 2811-3799 2590-423X |