What Determines Bank Stock Price Synchronicity? - Global Evidence

50 Pages Posted: 4 Jul 2012

See all articles by Bill B. Francis

Bill B. Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Liang Song

affiliation not provided to SSRN; University of Massachusetts Dartmouth

Bernard Yeung

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: April 18, 2012

Abstract

This paper examines what institutional and bank-specific factors determine bank stock price synchronicity. Using data on 37 countries from 1996–2007, we find that bank stocks are more aligned with the whole market during the financial crisis; in countries that have more credit provided by banks; in countries that do not have explicit depository insurance; and in countries that have lower bank-level disclosure. The results hold for both emerging and developed economy subsamples. Furthermore, in emerging economies, bank stocks in countries with higher degree of state-owned bank are more synchronized with the whole market, similarly, in developed markets, lower banking freedom enhances bank stock price synchronicity. Finally, the effects of state ownership, protection of property rights, and bank size are all more pronounced when determining bank stock price synchronicity during the financial crisis period.

Keywords: stock price synchronicity, financial crisis, bank ownership, deposit insurance, banking freedom, bank disclosure

JEL Classification: G12, G14, G15, G21, G38, N20

Suggested Citation

Francis, Bill B. and Hasan, Iftekhar and Song, Liang and Song, Liang and Yeung, Bernard, What Determines Bank Stock Price Synchronicity? - Global Evidence (April 18, 2012). Bank of Finland Research Discussion Paper No. 16/2012, Available at SSRN: https://ssrn.com/abstract=2100297 or http://dx.doi.org/10.2139/ssrn.2100297

Bill B. Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management ( email )

Troy, NY 12180
United States

Iftekhar Hasan (Contact Author)

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Liang Song

University of Massachusetts Dartmouth ( email )

285 Old Westport Road
N Dartmouth, MA 02747
United States

affiliation not provided to SSRN

Bernard Yeung

affiliation not provided to SSRN ( email )

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