Title

Financial Modernization In Us Banking Markets: A Local Or Global Event?

Keywords

Contagion effects; Financial Services Modernization Act; Glass-Steagall Act; Gramm-Leach-Bliley Act; Wealth effects

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. © Blackwell Publishing Ltd. 2005.

Publication Date

9-1-2005

Publication Title

Journal of Business Finance and Accounting

Volume

32

Issue

7-8

Number of Pages

1561-1585

Document Type

Review

Personal Identifier

scopus

DOI Link

https://doi.org/10.1111/j.0306-686X.2005.00640.x

Socpus ID

27844435706 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/27844435706

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