Title

Financial modernization in US banking markets: A local or global event?

Authors

Authors

A. Akhigbe; M. B. Frye;A. M. Whyte

Comments

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Abbreviated Journal Title

J. Bus. Finan. Account.

Keywords

Glass-Steagall Act; Financial Services Modernization Act; Gramm-Leach-Bliley Act; contagion effects; wealth effects; INTERNATIONAL DEBT CRISIS; SECURITY RETURNS; Business, Finance

Abstract

We test the hypothesis that the passage of the Financial Services Modernization Act (FSMA) of 1999 has spillover effects cross-nationally, using a sample of US, non-US transactional (Australian, Canadian, and UK), and relationship (German, Japanese, Dutch, and Swiss) banks. Our results suggest that financial modernization in the US has limited cross-national effects. We find strong evidence that US banks were affected favorably. Although we detect some evidence of significant reactions by banks in certain countries, a closer examination reveals that the reaction is most likely attributable to events in the respective countries during the event period. We do find, however, that non-US transactional banks have been more likely to elect financial holding company status compared to relationship banks, suggesting they are positioning themselves to exploit the expanded opportunity set created by the FSMA. Nonetheless, the majority of elections have been made by US banks. In general, the results suggest that the respective banking markets are efficient in filtering events that are largely country-specific with only limited implications for other international banks.

Journal Title

Journal of Business Finance & Accounting

Volume

32

Issue/Number

7-8

Publication Date

1-1-2005

Document Type

Article

Language

English

First Page

1561

Last Page

1585

WOS Identifier

WOS:000232019000013

ISSN

0306-686X

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