Does the Japanese Stock Market Price Bank-Risk_ Evidence from

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1、ELIJAHBREWERIIIHESNAGENAYWILLIAMCURTHUNTERGEORGEG.KAUFMANDoestheJapaneseStockMarketPriceBank-Risk?EvidencefromFinancialFirmFailuresTheabilityoftheJapanesestockmarkettoappropriatelypricetheriskinessofJapanesefinancialfirmshasbeenfrequentlyquestioned,partic

2、ularlyinlightofJapan’swidespreadfinancialdistressinrecentyearsandpoordisclosurerequirements.ThispaperexaminestheresponseinequityreturnsofJapanesebankstothefailureoffourcommercialbanksandtwosecuritiesfirmsbetween1995and1998.Usingeventstudymethodology,thean

3、alysisfindsthatsharepricesofsurvivingbanksonthewholerespondedunfavorablytothefailuresandthatfinanciallyweakersurvivorsweremoreadverselyaffected.Thissuggeststhat,despitethedistressandallegedopaqueness,bankshareholderswereabletouseavailableindicatorsoffinanc

4、ialconditionbothtoincorporatenewinformationquicklyintostockpricesandtodifferentiateamongbanks.Numerousrecentstudieshaveprovidedconvincingevi-dencethatU.S.stockpricesquicklyandreasonablyaccuratelyincorporatenewinformationthatmaybeexpectedtoaffectthefinanc

5、ialhealthofindividualfirms.Thisevidenceextendstocommercialbanksandthriftinstitutions,forwhichfinancialdataareperceivedtobemoreopaqueandfrequentlyavailableonalessaccurateandtimelybasis.Moreover,inassessingnewinformation,U.S.investorsappeartobeabletodiffere

6、ntiatetheimplicationsforindividualinstitutionsbasedontheirrelativefinancialhealth.1TheresearchassistanceofAnuArro,ScottBriggs,HowardFisher,KennethHousinger,KiYoungPark,A.V.Sekhar,GeorgeSimler,andAlexUrbinaisgreatlyappreciated.TheauthorsarealsoindebtedtoJ

7、ohnBinder,AnilKashyap,EricRosengen,participantsattheNBERJapanGroupMeeting,MarkFlannery(editor),andthetwoanonymousrefereesfortheirhelpfulreviewandcommentsonearlierdrafts.WealsowouldliketothankRiekoMcCarthyofMoody’sInvestorsServicefortheinformationshesoki

8、ndlyprovided.Wediscusssomeresultsthatarenotreportedinthearticle;thesecanbeobtainedfromtheauthorsuponrequest.TheviewsexpressedherearethoseoftheauthorsanddonotnecessarilyrepresenttheviewsoftheFederalReserveSystem.ElijahBrewerIIIisa