Bank foreign assets, government support and international spillover effects of sovereign rating events on bank stock prices
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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in: Journal of Banking and Finance, Jahrgang 130, 106187, 09.2021.
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - Bank foreign assets, government support and international spillover effects of sovereign rating events on bank stock prices
AU - Schertler, Andrea
AU - Moch, Nils
N1 - Publisher Copyright: © 2021 Elsevier B.V.
PY - 2021/9
Y1 - 2021/9
N2 - We study the international spillover effects of sovereign rating events on the stock returns of large banks in nonevent countries. Using S&P rating assessments from 1983 to 2018, we find that negative sovereign rating events spill over to foreign banks’ stock returns through the foreign asset holdings channel, especially if the rating shock to domestic banks is severe. Foreign sovereign debt holdings are not the only source to open such a channel. Negative sovereign rating events also spill over through foreign interbank exposures, but not through foreign claims to nonbank firms. We further find a previously undocumented positive side effect of government support to banks. The guarantee channel limits international spillover effects if banks with strong expected government support are located in countries with high sovereign ratings.
AB - We study the international spillover effects of sovereign rating events on the stock returns of large banks in nonevent countries. Using S&P rating assessments from 1983 to 2018, we find that negative sovereign rating events spill over to foreign banks’ stock returns through the foreign asset holdings channel, especially if the rating shock to domestic banks is severe. Foreign sovereign debt holdings are not the only source to open such a channel. Negative sovereign rating events also spill over through foreign interbank exposures, but not through foreign claims to nonbank firms. We further find a previously undocumented positive side effect of government support to banks. The guarantee channel limits international spillover effects if banks with strong expected government support are located in countries with high sovereign ratings.
KW - Announcement returns
KW - Banks
KW - Foreign asset holdings
KW - Government support
KW - International spillovers
KW - Sovereign rating events
KW - Management studies
UR - http://www.scopus.com/inward/record.url?scp=85107618744&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2021.106187
DO - 10.1016/j.jbankfin.2021.106187
M3 - Journal articles
AN - SCOPUS:85107618744
VL - 130
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
M1 - 106187
ER -