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THE EFFECT OF FDICIA REGULATION ON BANK HOLDING COMPANIES
Author(s) -
Carow Kenneth A.,
Larsen Glen A.
Publication year - 1997
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.1475-6803.1997.tb00242.x
Subject(s) - subsidy , shareholder , legislature , business , corporation , deposit insurance , bank regulation , government (linguistics) , sample (material) , financial system , finance , accounting , economics , monetary economics , market economy , corporate governance , law , linguistics , philosophy , chemistry , chromatography , political science
We examine market reactions to legislative announcements surrounding the passage of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991. Research shows that bank regulation adversely affects shareholder wealth on the one hand, yet often provides government subsidies on the other. The removal of Federal regulators' discretionary authority and the imposition of mandatory regulations in the FDICIA have an overall negative effect on our sample of bank holding companies. The results are consistent with either the costly regulation hypothesis or the decreased subsidies hypothesis.