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Journal of Economics and Finance

, Volume 17, Issue 1, pp 59–72 | Cite as

Market reaction to uniform capital adequacy guidelines in the banking industry

  • Jeff Madura
  • Emilio R. Zarruk
Article

Abstract

In this paper the authors assess the stock market reaction to information on uniform capital requirements that was disseminated on four different dates: September 29, 1987; December 7, 1987; December 10, 1987; and July 11, 1988. The share prices of U.S. money center banks were adversely affected by the December 7, 1987, announcement regarding proposals to make regulatory standards more uniform. The share prices of U.S. superregional banks were not affected by this announcement. The difference in degree of response is attributed to disparate capital positions between the two groups of banks. In order to meet the new guidelines, U.S. money center banks may need to implement policies (such as issuing new stock) that are viewed unfavorably by the market.

Keywords

Abnormal Return Federal Reserve Market Reaction Share Price Capital Requirement 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer 1993

Authors and Affiliations

  • Jeff Madura
    • 1
  • Emilio R. Zarruk
    • 1
  1. 1.Florida Atlantic UniversityBoca Raton

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