The impact of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 on the return and risk characteristics of publicly-traded depository institutions.

摘要

This study examines the impact of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) on the return and risk responses of banks and savings for different groups of banks and savings and loans in terms of FRS-membership, NOW account experience, types of banks, firm size, and state laws, individually and collectively. This study attempts to resolve the shortcomings in recent three events studies in identifying the current structural problems, detecting the legislative backgrounds, and applying the regulatory features into the return generating model. The empirical tests employ seventeen announcement events leading up to the DIDMCA, and the Multivariate Regression Model to overcome the cross-sectional correlation problem in stock return residuals.; The empirical findings of the abnormal return responses can be summarized as follows: (1) The return responses became more significant and different across different groups and within the same group of banks and savings and loans. (2) The effects of wealth redistribution and the market adjustment process are found within the banking industry, which supports Stigler's wealth transfer hypothesis. (3) Banks and savings and loans in this study did not show any significant return responses to several important events regarding the authorization of NOW accounts and regulation Q. (4) Large-sized and/or medium-sized banks gained but small-sized banks lost from the last announcement. In particular, small banks appeared to produce earlier and negative abnormal returns to the passage of the DIDMCA. (5) Under the different state laws, shareholders perceived the geographic diversification benefits through statewide branch banking rather than Mutibank holding company operations.; The risk responses of banks revealed significant reductions in systematic risk, regardless of types of banks, NOW experience, firm size, or state laws. However, the risk responses of savings and loans was insignificant. Therefore, this result rejects Peltzman's risk-buffering hypothesis.; The cross-sectional analysis shows that the size and total deposit variables are the most powerful in explaining the variations in abnormal return behavior.