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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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| 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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okr-10986-196892021-04-23T14:03:44Z Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis Klingebiel, Daniela Kroszner, Randy Laeven, Luc van Oijen, Pieter 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 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. 2014-08-26T17:44:02Z 2014-08-26T17:44:02Z 2001-03 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 English en_US Policy Research Working Paper;No. 2571 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
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 |
| spellingShingle |
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 Klingebiel, Daniela Kroszner, Randy Laeven, Luc van Oijen, Pieter Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis |
| geographic_facet |
East Asia and Pacific |
| relation |
Policy Research Working Paper;No. 2571 |
| description |
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. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Klingebiel, Daniela Kroszner, Randy Laeven, Luc van Oijen, Pieter |
| author_facet |
Klingebiel, Daniela Kroszner, Randy Laeven, Luc van Oijen, Pieter |
| author_sort |
Klingebiel, Daniela |
| title |
Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis |
| title_short |
Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis |
| title_full |
Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis |
| title_fullStr |
Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis |
| title_full_unstemmed |
Stock Market Responses to Bank Restructuring Policies during the East Asian Crisis |
| title_sort |
stock market responses to bank restructuring policies during the east asian crisis |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
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 |
| _version_ |
1764440362604036096 |