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THE DIFFERENTIAL EFFECTS OF DEREGULATION ON SAVINGS AND LOAN ASSOCIATIONS AND BANKS
Author(s) -
Graddy Duane B.,
Kyle Reuben,
Strickland Thomas H.
Publication year - 1994
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1994.tb00192.x
Subject(s) - deregulation , loan , legislature , liability , economics , interpretation (philosophy) , business , asset (computer security) , capital (architecture) , differential (mechanical device) , actuarial science , monetary economics , financial system , finance , macroeconomics , law , history , computer security , archaeology , engineering , political science , computer science , programming language , aerospace engineering
The passage of the Garn‐St Germain Depository Institutions Act of 1982 was a legislative response to the plight of the thrift industry. The Act broadened the asset/liability powers of thrifts and granted regulators emergency authority to aid failing institutions. In this paper we analyze the effect of the Act on the market returns of large S&Ls and banks using a two‐factor estimating procedure. Single‐factor models of depository institutions' returns produce biased estimates and confound the Act's interpretation. Explicit treatment of the event/risk interaction is necessary to avoid ambiguities in the interpretation of the Act's effect on the returns of depository institutions. It is difficult to use capital market data to pinpoint the effect of information flows on complex regulatory changes.