The impact of Japan's financial stabilization laws on bank equity values

Abstract

In the fall of 1998, two important financial regulatory reform acts were passed in Japan. The first of these acts, the Financial Recovery Act, created a bridge bank scheme and provided funds for the resolution of failed banks. The second act, the Rapid Revitalization Act, provided funds for the assistance of troubled banks. While both of these acts provided some government assistance to the banking sector, they also called for reforms aimed at strengthening the regulatory environment.Using an event study framework, this paper examines the evidence in equity markets concerning the anticipated impact of the regulatory reforms. Our evidence suggests that the Financial Recovery Act was expected to hurt large banks, while the anticipated impact of the act by financial strength was mixed. In contrast, the anticipated impact of the Rapid Revitalization Act was expected to be unambiguously anti-reform, as news favorable to its passage disproportionately favored large and weak Japanese banks. JEL classification numbers: G21, G28

The emergence of market monitoring in Japanese banks: Evidence from the subordinated debt market

“…Note that this equation uses primary market spreads of flexible rate subordinated notes rather than secondary market spreads as the dependent variable. The use of primary market spreads is appropriate when examining whether subordinated debt investors imposed 9 Spiegel and Yamori (2003) evaluated the effects of these laws on bank equity price. more funding costs on weaker banks.…”

Is the Distance to Default a Good Measure in Predicting Bank Failures? Case Studies

“…Details of the two acts and the impacts of the acts on the stock market are examined inSpiegel and Yamori (2003).…”

Quantitative easing and Japanese bank equity values

“…The coefficient estimate on the foreign exchange intervention variable, FX t , is almost exactly zero. 13 Spiegel and Yamori (2003) find that news concerning potential passage of bank regulatory changes in 1998 measurably affected Japanese bank equity values. 14 Source: Ministry of Finance.…”