The impact of FDICIA on bank returns and risk: Evidence from the capital markets

    Authors

    A. Akhigbe;A. M. Whyte

    Abbreviated Journal Title

    J. Bank Financ.

    Keywords

    bank risk; wealth effects; bank regulation; FINANCIAL INSTITUTIONS; COMMERCIAL-BANKS; SAVINGS; DIDMCA; ACT; Business, Finance; Economics

    Abstract

    This study examines the impact of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991 on bank stock returns and risk.. We find that FDICIA had a generally positive effect on bank stock returns and resulted in a significant reduction in bank risk. The extent of the risk reduction Varies based on the capitalization, size, and credit risk of the institutions with poorly capitalized, large, and high credit risk banks experiencing the greatest risk reduction. The results obtained using two separate control groups also bolster the conclusion that FDICIA's passage resulted in a significant decline in bank risk. (C) 2001 Elsevier Science B.V. All rights reserved. JEL classification: G21; G28.

    Journal Title

    Journal of Banking & Finance

    Volume

    25

    Issue/Number

    2

    Publication Date

    1-1-2001

    Document Type

    Article

    Language

    English

    First Page

    393

    Last Page

    417

    WOS Identifier

    WOS:000166604600007

    ISSN

    0378-4266

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