Pure Contagion Effects in International Banking: The Case of Bcci's Failure

Journal of Applied Economics, Vol. 8, No. 1, pp. 101-123, May 2005

Posted: 7 Jul 2005

See all articles by Angelos Kanas

Angelos Kanas

University of Crete - Department of Economics

Abstract

We test for pure contagion effects in international banking arising from the failure of the Bank of Credit and Commerce International (BCCI), one of the largest bank failures in the world. We focused on large individual banks in three developed countries where BCCI had established operations, namely the UK, the US, and Canada. Using event study methodology, we tested for contagion effects using time windows surrounding several known BCCI-related announcements. Our analysis provides strong evidence of pure contagion effects in the UK, which have arisen prior to the official closure date. In contrast, there is no evidence of pure contagion effects in the US and Canada.

Keywords: Bank failures, pure contagion effects, event study methodology, abnormal returns

JEL Classification: G21, G28

Suggested Citation

Kanas, Angelos, Pure Contagion Effects in International Banking: The Case of Bcci's Failure. Journal of Applied Economics, Vol. 8, No. 1, pp. 101-123, May 2005, Available at SSRN: https://ssrn.com/abstract=753654

Angelos Kanas (Contact Author)

University of Crete - Department of Economics ( email )

GR-74100 Rethymnon, GR-74100
Greece
0831-77427 (Phone)

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