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Does individual SREP results reveal real news?

Author

Listed:
  • Ferretti, Riccardo
  • Venturelli, Valeria
  • Azzaretto, Alessandro

Abstract

The disclosure of SREP results aims to enhance transparency and reduce opacity in the banking sector. Prior to 2020, there was no standardized framework for disclosure, leading to diversity in approaches across banks and countries. In 2020, the ECB established a common disclosure framework by publishing individual capital requirements resulting from the SREP exercise. This study fills a research gap in the literature by examining the impact of individual SREP results on bank share prices and identifying the information that influences the market reaction. The sample includes 168 SREP communications from 43 significant institutions in 14 European countries. The findings indicate that the disclosure of SREP results provides new information to the market, allowing for more accurate pricing distinctions and alleviating investor concerns. These findings have implications for regulators and market participants in understanding the role of SREP in market dynamics.

Suggested Citation

  • Ferretti, Riccardo & Venturelli, Valeria & Azzaretto, Alessandro, 2023. "Does individual SREP results reveal real news?," Finance Research Letters, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:finlet:v:57:y:2023:i:c:s1544612323005561
    DOI: 10.1016/j.frl.2023.104184
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    More about this item

    Keywords

    SREP process; Event study; Abnormal return; Information content;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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