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Do international institutions affect financial markets?: evidence from the Greek Sovereign Debt Crisis

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  • Marianne Gogstad
  • Ali M. Kutan
  • Yaz Gulnur Muradoglu

Abstract

This paper investigates the effects of the policy announcements from the International Monetary Fund, and European Union (EU) offices including the European Commission, the European Central Bank, the Euro Area ministers on financial and real sectors during the recent Greek Sovereign Debt Crisis. We also include the reactions of financial and real sectors to Rating Agencies, Greek government and Greek public that were actively involved. We find that financial sectors have stronger reactions to international institutions and Greek government policy action announcements than the real sectors. Banking and financial sectors react predominantly negatively to unfavorable announcements, while real sector responses are mixed. The immediate reaction to EU offices and troika policy announcements are the highest in banking with negative abnormal returns of more than 1.5% per day. Public riots following unfavorable EU announcements also generate high falls in banking and financial sectors. The results show that favorable effects of an announcement from an international organization can be offset by negative effects arising from protests from the public and negative responses of the local government to announcements from international organizations.

Suggested Citation

  • Marianne Gogstad & Ali M. Kutan & Yaz Gulnur Muradoglu, 2018. "Do international institutions affect financial markets?: evidence from the Greek Sovereign Debt Crisis," The European Journal of Finance, Taylor & Francis Journals, vol. 24(7-8), pages 584-605, May.
    • Handle: RePEc:taf:eurjfi:v:24:y:2018:i:7-8:p:584-605
    DOI: 10.1080/1351847X.2017.1335223
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    Cited by:

    1. Anastasiou, Dimitrios & Kapopoulos, Panayotis, 2021. "Dynamic linkages among financial stability, house prices and residential investment in Greece," MPRA Paper 107833, University Library of Munich, Germany.
    2. Guglielmo Maria Caporale & Stavroula Yfanti & Menelaos Karanasos & Jiaying Wu, 2024. "Financial integration and European tourism stocks," Chapters, in: Guglielmo M. Caporale (ed.), Handbook of Financial Integration, chapter 21, pages 495-538, Edward Elgar Publishing.
    3. Erasmus Kersting & Christopher Kilby, 2019. "Does the World Bank Move Markets?," Villanova School of Business Department of Economics and Statistics Working Paper Series 42, Villanova School of Business Department of Economics and Statistics.
    4. Filiz Mızrak & Serhat Yüksel, 2019. "Significant Determiners of Greek Debt Crisis: A Comparative Analysis with Probit and MARS Approaches," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 8(3), pages 33-50, July.
    5. Brzeszczyński, Janusz & Gajdka, Jerzy & Kutan, Ali M., 2015. "Investor response to public news, sentiment and institutional trading in emerging markets: A review," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 338-352.
    6. Oncu, Erdem, 2021. "The impact of COVID-19 on health sector stock returns," MPRA Paper 111032, University Library of Munich, Germany.

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