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MARKET REACTION TO NATIONAL DISCRETION IN IMPLEMENTING THE BASLE ACCORD
Author(s) -
Wagster John,
Kolari James,
Cooper Kerry
Publication year - 1996
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.1475-6803.1996.tb00218.x
Subject(s) - discretion , disadvantaged , equity (law) , economics , capital market , monetary economics , national capital , business , finance , national accounts , accounting , political science , economic growth , law
We report the wealth effects among banks in the United States, Japan, Canada, and the United Kingdom in reaction to public announcements concerning their respective national implementation of the 1988 Basle Accord, an international risk‐based capital regulatory agreement. Previous survey findings indicate bankers in different countries perceive that national discretion could threaten the competitive equity goals of the new risk‐based capital rules. Based on a multivariate regression model using seemingly unrelated equations, we find significantly positive and negative market reactions by bank investors to individual announcements of different countries' post‐Accord capital rules. However, no particular country's banks were systematically advantaged or disadvantaged with national discretion announcements viewed in aggregate. Although national discretion does affect bank wealth, the evidence does not suggest that national implementation compromises the competitive goals of the Accord.