Reactions of equity markets to recent financial reforms

Nonna Sorokina, John H. Thornton

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

We conduct event studies of broad equity market reaction to the events surrounding introduction and enactment of recent financial reform initiatives. In response to the introduction of the Dodd-Frank Act, financial firms and firms from a few other industries experience a statistically significant decrease in systematic risk, while a substantial number of industries, representing a broad cross-section of the economy, experiences a statistically significant increase in systematic risk. The systematic risk in some industries does not change. The increase in risk is concentrated in industries in which firms are dependent on external capital. The initial market reaction to Dodd-Frank indicates that it may lower the risk in financial firms, but the risk for many non-financial firms simultaneously increases.

Original languageEnglish (US)
Pages (from-to)50-69
Number of pages20
JournalJournal of Economics and Business
Volume87
DOIs
StatePublished - Sep 1 2016

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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