Winners and Losers from Enacting the Financial Modernization Statute / Kenneth A. Carow, Edward J. Kane, Rajesh P. Narayanan.

Format:

Book

Author/Creator:

Carow, Kenneth A.

Contributor:

National Bureau of Economic Research.

Kane, Edward J.

Narayanan, Rajesh P.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11256.

NBER working paper series no. w11256

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

Previous studies of the announcement effects of relaxing administrative and legislative restraints show that signal events leading up to the enactment of the Financial Services Modernization Act (FSMA) increased the prices of several classes of financial-institution stocks. An unsettled question is whether the gains observed for these stocks arise mainly from projected increases in efficiency or from reductions in customer or competitor bargaining power. This paper documents that the value increase came at the expense of customers and competitors. The stock prices of credit-constrained customers declined during FSMA event windows and experienced significant increases in beta in the wake of its enactment. These findings reinforce evidence in the literature on bank mergers that large-bank consolidation is adversely affecting access to credit for capital-constrained firms.

Notes:

Print version record

April 2005.