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Banking market reaction to auctions of failed banks / Philip Molyneux, Tim Zhou

International Journal of Finance & Economics

Swansea University Author: Tim Zhou

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DOI (Published version): 10.1002/ijfe.2166

Abstract

In this study, we find that non-merger rival banks of failed banks from 2008 to 2013 experience substantial negative abnormal stock returns in the United States when failed banks are auctioned. Negative abnormal returns are related to contagion effects associated with an increased probability of the...

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Published in: International Journal of Finance & Economics
ISSN: 1076-9307 1099-1158
Published: Wiley 2020
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa54637
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Abstract: In this study, we find that non-merger rival banks of failed banks from 2008 to 2013 experience substantial negative abnormal stock returns in the United States when failed banks are auctioned. Negative abnormal returns are related to contagion effects associated with an increased probability of their own failure and the information of these rival banks' opaque assets. We also find evidence that FDIC resolutions of these failed banks, similar to previous regulatory interventions, distort the market competition.
Keywords: auction, banks, FDIC, resolution
College: School of Management