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Regulation, Risk and the Pricing of Australian Bank Shares, 1957–1976

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  • WARREN P. HOGAN
  • IAN G. SHARPE

Abstract

Recent contributions to the theory of regulation have suggested the possibility of discriminatory regulation affecting risk and profits of firms subject to public intervention. This paper examines risk and wealth effects associated with Australian banking regulation. Support is found for the Peltzman and Edwards and Heggestad hypothesis that regulation reduces risk and for Johnson's hypothesis that statutory reserve deposit requirement policy involves an implicit tax on bank shareholders.

Suggested Citation

  • Warren P. Hogan & Ian G. Sharpe, 1984. "Regulation, Risk and the Pricing of Australian Bank Shares, 1957–1976," The Economic Record, The Economic Society of Australia, vol. 60(1), pages 34-44, March.
    • Handle: RePEc:bla:ecorec:v:60:y:1984:i:1:p:34-44
    DOI: 10.1111/j.1475-4932.1984.tb00836.x
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    References listed on IDEAS

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    1. Mingo, John J., 1978. "The effect of deposit rate ceilings on bank risk," Journal of Banking & Finance, Elsevier, vol. 2(4), pages 367-378, December.
    2. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
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    5. Mingo, John J, 1976. "Managerial Motives, Market Structures and the Performance of Holding Company Banks," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 411-424, September.
    6. Franklin R. Edwards & Arnold A. Heggestad, 1973. "Uncertainty, Market Structure, and Performance: The Galbraith-Caves Hypothesis and Managerial Motives in Banking," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 455-473.
    7. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    8. Heggestad, Arnold A & Mingo, John J, 1976. "Prices, Nonprices, and Concentration in Commercial Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(1), pages 107-117, February.
    9. George J. Benston, 1964. "Interest Payments on Demand Deposits and Bank Investment Behavior," Journal of Political Economy, University of Chicago Press, vol. 72(5), pages 431-431.
    10. Oliver D. Hart & Dwight M. Jaffee, 1974. "On the Application of Portfolio Theory to Depository Financial Intermediaries," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(1), pages 129-147.
    11. Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 1-37, January.
    12. Heggestad, Arnold A, 1977. "Market Structure, Risk and Profitability in Commercial Banking," Journal of Finance, American Finance Association, vol. 32(4), pages 1207-1216, September.
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    Cited by:

    1. Brooks, Robert D. & Faff, Robert W. & Yew, Kee Ho, 1997. "A new test of the relationship between regulatory change in financial markets and the stability of beta risk of depository institutions," Journal of Banking & Finance, Elsevier, vol. 21(2), pages 197-219, February.
    2. Brailsford, Timothy J. & Josev, Thomas, 1997. "The impact of the return interval on the estimation of systematic risk," Pacific-Basin Finance Journal, Elsevier, vol. 5(3), pages 357-376, July.
    3. Carolyn Currie, 1991. "The Need for Reform of the Australian Financial Regulatory System," Working Paper Series 9, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    4. N. Groenewold, 2000. "Financial Deregulation and the Relationship Between the Economy and the Share Market in Australia," Economics Discussion / Working Papers 00-10, The University of Western Australia, Department of Economics.
    5. W.P. Hogan & Ian G. Sharpe, 1990. "Prudential Supervision of Australian Banks," The Economic Record, The Economic Society of Australia, vol. 66(2), pages 127-145, June.
    6. Papadamou, Stephanos & Tzivinikos, Trifon, 2013. "The risk relevance of International Financial Reporting Standards: Evidence from Greek banks," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 43-54.

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