The Savings And Loan Industry And Interstate Branching: An Event Study
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Date
1994
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Abstract
This study examines the impact on shareholder wealth of a rule announced by the Office of Thrift Supervision (OTS) on December 23, 1991, allowing federally chartered savings and loan associations (thrifts) to branch across state lines. The rule, which went into effect on May 11, 1992, came amid a continuing debate within the banking industry, which is currently prohibited from interstate branching by the McFadden Act of 1927, as amended by the Glass-Steagall Act of 1933. By adhering to the efficient market hypothesis that all publicly available information is reflected in security prices and those security prices quickly adjust to fully reflect new information, an event study has been conducted to analyze stock market reaction to the OTS ruling in order to assess its impact on the wealth of investors in sampled federally chartered savings and loan securities. Because this ruling will allow federally chartered savings and loans to diversify their loan portfolio, thereby spreading the risk of losses from fluctuations in regional economies, and because it will give the thrift industry a geographic advantage over commercial banks, this ruling is expected to positively affect the value of a federal thrift charter
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Program year: 1996/1997
Digitized from print original stored in HDR
Digitized from print original stored in HDR
Keywords
security prices, Office of Thrift Supervision, interstate branching, federal thrift charter