Wealth and risk implications of the Dodd-Frank Act on the U.S. financial intermediaries

Andriosopoulos, K., Chan, K., Dontis-Charitos, P. and Staikouras, S.K. 2017. Wealth and risk implications of the Dodd-Frank Act on the U.S. financial intermediaries. Journal of Financial Stability. 33, pp. 366-379. https://doi.org/10.1016/j.jfs.2016.09.006

TitleWealth and risk implications of the Dodd-Frank Act on the U.S. financial intermediaries
TypeJournal article
AuthorsAndriosopoulos, K., Chan, K., Dontis-Charitos, P. and Staikouras, S.K.
Abstract

We contribute to the current regulatory debate by examining the wealth and risk effects of the Dodd- Frank Act on U.S. financial institutions. We measure the effects of key legislative events of the Act by means of a multivariate regression model using the seemingly unrelated regression (SUR) framework. Our results indicate a mixed reaction by financial institutions during the various stages of the Act’s legislative process. Further tests reveal that any positive reactions are driven by small and/or low risk institutions, while negative ones are consistent across subsets; except for investment banks. We also find market risk increases for most financial institutions that are dominated by small and/or low risk firms. The cross-section results reveal that large institutions fare better than their smaller counterparts and that large investment banks gain value at the expense of others. Overall, the Dodd-Frank Act may have redistributed value among financial institutions, while not necessarily reducing the industry’s riskiness.

KeywordsBanks, Financial institutions, Dodd-Frank Act, Event study, SUR
JournalJournal of Financial Stability
Journal citation33, pp. 366-379
ISSN1572-3089
Year2017
PublisherElsevier
Accepted author manuscript
Digital Object Identifier (DOI)https://doi.org/10.1016/j.jfs.2016.09.006
Publication dates
Published online28 Sep 2016
Published28 Sep 2016
Published in printDec 2017
LicenseCC BY-NC-ND 4.0

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