Corporate valuation and the resolution of bank insolvency in East Asia |
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| Institution: | 1. CSIRO, GPO Box 1700, Canberra, ACT 2601, Australia;2. The Plant Biosecurity Cooperative Research Centre, Australia;3. European Commission, Joint Research Centre, Institute for Environment and Sustainability, Via Enrico Fermi 2749, I-21027 Ispra, Italy;4. Victoria Department of Environment and Primary Industries, Agribio, 5 Ring Road, La Trobe University, Bundoora, Vic 3083, Australia;5. Department of Agriculture and Food Western Australia, Locked Bag 4, Bentley Delivery Centre, WA 6983, Australia;6. School of Agricultural and Resource Economics, The University of Western Australia, 35 Stirling Highway, Crawley, Perth, WA 6009, Australia;1. Technische Universität Dresden, Chair of International Monetary Economics, Dresden, and Halle Institute for Economic Research (IWH), Department of Financial Markets, Halle, Germany;2. Leibniz University Hannover, Institute of Money and International Finance, Hannover, Germany;3. Otto von Guericke University Magdeburg and Halle Institute for Economic Research (IWH), Department of Financial Markets, Halle, Germany;1. Center for Health Disparities Research, Medical University of South Carolina, 135 Rutledge Avenue, P.O. Box 250593, Charleston, SC 29425, USA;2. Department of Medicine, Division of General Internal Medicine and Geriatrics, Medical University of South Carolina, 96 Jonathan Lucas Street, Suite 803, MSC 623, Charleston, SC 29425, USA;3. Health Equity and Rural Outreach Innovation Center, Ralph H. Johnson VA Medical Center, 109 Bee Street, Charleston, SC 29401, USA |
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| Abstract: | We examine the valuation effect of the resolution of a bank’s insolvency on commercial clients. Our sample includes 29 insolvent banks in Indonesia, Korea, and Thailand that serve as main creditors for 269 publicly traded companies. Our findings suggest that a bank relationship adds value to a firm, and that this value depends on investors’ certainty in the continuity of the banking relationship. Significant cumulative returns for 50 days following the event date suggest that the type of resolution has real effects on the performance of related firms above initial expectations. |
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