An analysis of contagion and competitive effects at commercial banks

Myron B. Slovin, Marie Sushka, John A. Polonchek

Research output: Contribution to journalArticle

55 Citations (Scopus)

Abstract

We examine whether an adverse event at one bank generates externalities for the banking industry, and assess whether the population of commercial banks is homogeneous. We find dividend reductions are negative events for both announcing money center and regional banks, but only reductions at money center banks have negative, contagion-type externalities. Dividend reductions at regional banks have positive competitive effects on geographic rivals. Regulatory enforcement actions induce negative valuation effects that are idiosyncratic to targeted banks, but actions against regional banks generate positive competitive effects on geographic rivals. Our evidence suggests that regional banking markets are not contestable.

Original languageEnglish (US)
Pages (from-to)197-225
Number of pages29
JournalJournal of Financial Economics
Volume54
Issue number2
StatePublished - Oct 1999

Fingerprint

Competitive effect
Commercial banks
Contagion effect
Dividends
Externalities
Banking
Valuation effects
Contagion
Adverse events
Regulatory enforcement
Banking industry

Keywords

  • Commercial bank regulation
  • Contagion
  • Contestability
  • Dividends
  • G21
  • G28
  • Too big to fail

ASJC Scopus subject areas

  • Accounting
  • Strategy and Management
  • Economics and Econometrics
  • Finance

Cite this

An analysis of contagion and competitive effects at commercial banks. / Slovin, Myron B.; Sushka, Marie; Polonchek, John A.

In: Journal of Financial Economics, Vol. 54, No. 2, 10.1999, p. 197-225.

Research output: Contribution to journalArticle

Slovin, Myron B. ; Sushka, Marie ; Polonchek, John A. / An analysis of contagion and competitive effects at commercial banks. In: Journal of Financial Economics. 1999 ; Vol. 54, No. 2. pp. 197-225.
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