Year: 2020
Type: article
Abstract: This paper investigates the impact of stress testing results on banks’ equity and CDS performance using a large sample of 12 tests from the US CCAR and the European EBA regimes in the time period from 2010 to 2018. Passing banks experience positive abnormal equity returns and tighter CDS spreads, while failing banks show strong drops in equity prices and widening CDS spreads. We also document strong market reactions at the announcement date of the stress tests. We complement existing studies by investigating the predictability of stress test outcomes and evaluating strategic options for affected banks and investors.
Source: European Financial Management
DOI: 10.1111/eufm.12267
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3021704309