Description: Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis

Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis

The East Asian crisis began in Thailand in mid-1997 when an ailing financial sector, a slowdown in exports, and large increases in central bank credit to weak financial institutions, triggered a run on the baht. Then the crisis spread to other coun...

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Bibliographic Details
Main Authors:	Klingebiel, Daniela, Kroszner, Randy, Laeven, Luc, van Oijen, Pieter
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ASSET MANAGEMENT COMPANIES ASSET PRICES ASSETS AUDITORS BAD DEBT BALANCE SHEETS BANK BAILOUTS BANK CAPITALIZATION BANK CLOSURES BANK INSOLVENCY BANK LIABILITIES BANK RECAPITALIZATION BANK RESTRUCTURING BANK RESTRUCTURING STRATEGIES BANK STOCKS BANKING CRISES BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKS BENCHMARK BONDS BORROWING CENTRAL BANK CENTRAL BANKS CLOSED BANKS COMMERCIAL BANKS CONTAGION CORPORATE SECTOR CURRENCY CRISES DEPOSIT INSURANCE DEPOSITORS DEVALUATION ECONOMICS EMERGING MARKETS EXPORTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL RESTRUCTURING FINANCIAL SECTOR FINANCIAL SYSTEMS GDP GOVERNMENT GUARANTEES GOVERNMENT SUPPORT INSOLVENT BANKS LIQUIDITY LOCAL GOVERNMENTS MARKET DEVELOPMENTS MARKET PRICES MARKET RETURNS MARKET VALUE MERCHANT BANKS MERGERS NATIONALIZATION NONPERFORMING LOANS PRESS RELEASES PRICE INDEX PRIVATE BANKS RECAPITALIZATION REGRESSION ANALYSIS SPREAD STATE BANKS STOCK MARKETS STOCK PRICES TRADING
Online Access:	http://documents.worldbank.org/curated/en/2001/03/1047482/stock-market-responses-bank-restructuring-policies-during-east-asian-crisis http://hdl.handle.net/10986/19689

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Summary:	The East Asian crisis began in Thailand in mid-1997 when an ailing financial sector, a slowdown in exports, and large increases in central bank credit to weak financial institutions, triggered a run on the baht. Then the crisis spread to other countries in the region, as common vulnerabilities, and revaluations of risk in emerging markets, triggered large capital flows. To better understand the impact of different policy responses to financial crises, the authors investigate how stock markets in East Asian countries reacted to the initial policy announcements of bank, and financial restructuring - especially how banking, and non-financial sectors in Indonesia, the Republic of Korea, Malaysia, and Thailand, fared in response to announcements of different restructuring measures. They find that prices of bank stocks, responded positively to announcements about government guarantees of bank liabilities. Non-financial companies gained in value when guarantees were announced, but their stock prices were negatively affected by announcements favoring public re-capitalization schemes, and generous liquidity support programs. Possibly the market was concerned that public funds per se, would not restore the health of the financial sector - that they would not be sufficient, or would not be used to restructure bank balance sheets, and operations, and allow banks to engage in meaningful corporate restructuring. The announcements of increased public support, have been viewed as a signal that the financial institutions were in a financially weaker position than previously thought.

Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis

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