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The impact of expected regulatory changes: The case of banks following the 2016 U.S. election

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  • Hachenberg, B.
  • Kiesel, F.
  • Kolaric, S.
  • Schiereck, D.

Abstract

We analyze bank stocks and credit default swap (CDS) spreads around the U.S. presidential election on November 8, 2016. We find a strong rally in bank stocks combined with an overall widening in bank CDS spreads during the days after the announcement of the election result. Following Donald Trump's victory, market participants appear to anticipate a lowering of financial sector regulation, particularly with respect to the Dodd-Frank act. In addition, we find that Global Systemically Important Banks (G-SIBs) reacted more positive than non-G-SIBs, with stocks having larger gains and CDS remaining relatively stable. Non-G-SIB stocks, on the other hand, gained less and their CDS widened, indicating less favorable changes from deregulation than for G-SIBs.

Suggested Citation

  • Hachenberg, B. & Kiesel, F. & Kolaric, S. & Schiereck, D., 2017. "The impact of expected regulatory changes: The case of banks following the 2016 U.S. election," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 84772, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:84772
    DOI: 10.1016/j.frl.2016.12.021
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/84772/
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    File URL: http://dx.doi.org/10.1016/j.frl.2016.12.021
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    Cited by:

    1. Refk Selmi & Jamal Bouoiyour, 2020. "The financial costs of political uncertainty: Evidence from the 2016 US presidential elections," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(2), pages 166-185, May.
    2. Delia DiaconaÅŸu & Seyed Mehdian & Ovidiu Stoica, 2023. "The Global Stock Market Reactions to the 2016 U.S. Presidential Election," SAGE Open, , vol. 13(2), pages 21582440231, June.
    3. Killins, Robert N. & Ngo, Thanh & Wang, Hongxia, 2022. "Financial institution IPOs and regulatory environments," Finance Research Letters, Elsevier, vol. 46(PB).
    4. Mobeen Ur Rehman & Wafa Ghardallou & Nasir Ahmad & Xuan Vinh Vo & Sang Hoon Kang, 2024. "Does effect of risk and uncertainties on US sectoral returns differ across different investment horizons and market conditions," Risk Management, Palgrave Macmillan, vol. 26(1), pages 1-49, February.
    5. Samson Mukanjari & Thomas Sterner, 2024. "Do markets Trump politics? Fossil and renewable market reactions to major political events," Economic Inquiry, Western Economic Association International, vol. 62(2), pages 805-836, April.
    6. Beckmann, Lars & Hark, Paul F., 2024. "ChatGPT and the banking business: Insights from the US stock market on potential implications for banks," Finance Research Letters, Elsevier, vol. 63(C).

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