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 the...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Universiti Utara Malaysia
2005
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| Subjects: | |
| Online Access: | http://repo.uum.edu.my/3564/1/Nor3.pdf http://repo.uum.edu.my/3564/ http://epublications.bond.edu.au/ijbf/vol3/iss1/4/ |
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| 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, his study provides a test of the prediction of theory that SRR is a powerful macroeconomic policy tool to revive an economy in the aftermath of a financial crisis. |
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