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Gallagher, M.A.
Languages: English
Types: Doctoral thesis
Subjects: HG
This dissertation focuses primarily on potential explanations for bank common stock abnormal returns, and their patterns, coincident with the announcement of bank capital issues. Potential influences considered include increased regulatory pressure, conflicting regulatory and market views of bank capital adequacy and the relative predictability of security type. Where possible, the dissertation is set in both UK and US contexts. The dissertation has four principal research components; (1) a review of historical and contemporary bank capital regulation in the UK and US. Historical analysis indicates that the definition of capital, as determined by its functional properties, is dynamic and qualifies the consistency of its measurement over time. The regulatory control of absolute levels of capital is seen to have influence on bank structural development, costs and risk. The regulatory control of relative bank capital (ie in terms of balance sheet structure) is found to have a long and controversial history in the US and is effective progenitor of the current methodology of bank capital measurement and assessment, such as the Basle Agreement, and contains a number of potentially costly deficiencies. (2) an examination of bank capital issue announcement effects in the UK. Following similar work in the US (eg Keeley 1989) negative abnormal return effects are found associated with the announcements of UK ordinary share issues. Also, evidence hints that an imposed increase in regulatory capital pressure (viz the introduction of a minimum capital ratio regime) causes a reduction in issue announcement effects for ordinary share issues. (3) assessment of the capital adequacy of UK and US banks from a market perspective and in terms of a number definitions of capital; namely equity, regulatory primary capital (US), and the 1992 Basle Agreement capital.Conflict between market and regulatory views of capital adequacy are observed in certain years for primary capital. In terms of the capital structure relevance hypothesis, this suggests particular costs which may influence issue announcement effects. (4) modelling the predictability of UK bank capital issue security type (viz ordinary share and debt) and assessing the hypothesis that it is inversely related to the announcement abnormal returns.
  • The results below are discovered through our pilot algorithms. Let us know how we are doing!

    • 3.1 US Ratio of Bank Equity Capital to Total Book Assets: Maisel (1981)
    • 3.2 UK Bank Capital Ratios: Collins (1988)
    • 3.3 Equity Capital Ratios: Banks in England & Wales Derived from Crick & Wadsworth (1936)
    • 4.1 Balance Sheet: Liability Side Structures Major UK Banks (1970, 1980, 1990): Derived from Annual Accounts
    • 4.2 Basle Agreement A: Basle Standards - Schedule B: United Kingdom Basle Agreement Ratios C: United States Basle Agreement Ratios
    • 4.3 Equity Capital Ratios of Major UK Banking Groups: Derived from Annual Accounts
    • 4.4 Equity Ratios: Book Values and Market Values: Derived from Annual Accounts
    • 4.5 Ratio of Market to Book Value of Equity: Derived from Annual Accounts
    • 4.6 Market View of Bank Capital Adequacy: Source: Shome et al (1987)
    • 6.1 Distribution of Number of Issues by Security Type
    • 6.2 Distribution of Sample by Bank and Security Type
    • 6.3 Average Two-Day Abnormal Returns (AAR) 1975-1989 by Security Type
    • 6.4 Average Two-Day Abnormal Returns (AAR) Pre and Post 1987
    • 6.5 Average Two-Day Abnormal Returns (AAR) Pre and Post 1979-80
    • 7.1 A: Regulatory and Market Capital Adequacy Status B: Issue Announcement Effects
    • 7.2 A: 6 Major UK Banks: Capital Defined as Equity B: US BHCs: Capital Defined as Equity C: US BHCs: Capital Defined as Primary Capital D: US BHCs: Capital Defined per Basle Agreement
    • 7.3 US Primary Capital Assessment: Regulator Vs Market
    • 8.1 Security Type Issued Prediction Studies
    • 8.2 "Confusion" Matrix
    • 8.3 A: Discriminant Observations of UK Capital Issues B: Predictor. Variables: Mean, Standard Deviation and Tests for Univariate Equality of Group Means C: Canonical Discriminant Function Coefficients: 8 Variables
    • 8.4 A: Canonical Discriminant Function Coefficients: 4 Variables B: Classification Results: 4 Variable Model
    • 8.5 Portfolio AARs: 4 Variable Model Classification
    • 2.1 REH and EMH A: Criticisms, Tests and Applications of the REH 5 B: Formulation of the EMH 9 C: Criticisms of the EMH 18
    • 2.2 Samuelson Contributions A: Samuelson (1965): Proof that Commodity Futures Prices follow a Random Walk 41 B: Samuelson (1973): Derivation of the Martingale Property of Stock Prices 44 C: Samuelson (1989) The Judgement of Economic Science on Rational Portfolio Management: Indexing, Timing, and Long-Horizon Effects 45
    • 2.3 Arrow and Debreu Contributions A: Arrow (1962) Information Markets 56 B: Arrow(1963) Insurance, Risk and Resource Allocation 60 C: Arrow(1964), Debreu (1959) Complete Capital Markets 65
    • 2.4 Barnea et al (1985): The Nature of Agency Problems 70
    • 2.5 Empirical Studies of Capital Issue Announcements A: Semi-Strong Tests of Capital Issues 76 B: "Pure" Leverage Announcement Studies 79 C: Capital Issue Announcement Studies 81 D: Smith (1986): Tabular Summary of AR Results 88
    • 3.1 Stigler (1971): Aspects of the Political Process
    • 3.2 Goodhart (1985): The Case for Central Banking
    • 3.3 Dale (1984): Forms of Prudential Regulation
    • 3.4 Cooper & Fraser (1986): Major US Regulatory Developments Post 1913
    • 3.5 Wilcox (1979), Webber (1989): Decline in UK Bank Capital Ratios
    • 3.6 Crick & Wadsworth (1936): Table of English Bank and Branch Numbers, and Liability Structures 1844, 1884, 1904 and 1934
    • 4.1 Accounting Definition A: Hicks (1946): The Nature of Income B: Income Measurement and Presentation C: Equity Components D: Bank Accounting Policies E: Capital Structure Change
    • 4.2 Revell (1975), Gardener (1981): Risk Frameworks
    • 4.3 US Post-1981 Bank Capital Regulatory Regime
    • 4.4 Basle Committee: 1988 Agreement
    • 4.5 Bank Capital Structure: Models and Evidence A: Early Evidence on Relationship between Bank Capital Structure and Value (Cost of Capital) B: Models of General Market Imperfections
    • 4.6 Vlachakis (1988): The Development and Variety of Bank Asset Management Techniques
    • 5.1 Keeley (1989): US Bank Capital Issue Announcement
    • Effects A: Abnormal Returns by Security Type: 1975-86 B: Abnormal Returns Pre and Post December 1981 C: Common Stock ARs, by Regime, by Capital Adequacy Status D: Percent Change in Capital/Asset Ratio
    • 6.1 Event Date and Issue Details 205
    • 6.2 UK Bank Event Dates and Abnormal Return Measurements 206
    • 6.3 Average Two-Day Abnormal Returns (AAR) 1975-1989 207
    • 6.4 A: All Observations 208 B: Excludes Events with Coincident Announcement 209 C: Loans: Dated-Undated 210 D: Loans: Fixed or Floating Interest Charge 211 E: Ordinary and Loan Stock Events by Periods 212
    • 7.0 Two Stage Regression Results A: Major UK Banks Equity Capital (1978-89) 216 B: List of US Banks (1983-87): Compatible Equity Data 217 C: US Equity Capital (1983-87) 220 D: US Primary Capital (1983-87) 221 (i). All Banks (ii). Primary Capital Ratio Over (iii). Primary Capital Ratio Under E: US Basle Risk-Weighted Capital 1989 (1992 Standards) 224 (i). All Banks (ii). Risk-Weighted Capital Ratio Over 8%
    • 8.1 Industrial Predictive Models and Predictor Variables 226
    • 8.2 A: Predictor (Independent) Variables 230 B: Balance Sheet and Income Statement Account Items and Codes: Source IBCA 231
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