Interbank Network Characteristics, Monetary Policy ‘News’ and Sensitivity of Bank Stock Returns

36 Pages Posted: 10 Feb 2020

See all articles by Aref Mahdavi Ardekani

Aref Mahdavi Ardekani

University of Paris 1 Pantheon-Sorbonne, CES; Université de Limoges, LAPE

Isabelle Distinguin

Université de Limoges, LAPE

Amine Tarazi

University of Limoges - Laboratoire d'Analyse et de Prospectives Économiques (LAPE); University of Limoges - Faculty of Law and Economic Science

Date Written: October 1, 2019

Abstract

This paper investigates whether interbank network topology influences the impact of monetary policy announcements on bank cumulative abnormal returns (CAR's). Although recent studies have emphasized the channels of non-conventional monetary policy actions and the sensitivity of bank stock prices to "News", how such reaction could be influenced by the shape of bank networks remains an open issue. We look at how banks' interconnectedness within interbank loan and deposit networks affects investors' expectations of future bank performance in response to monetary policy "News". Our sample consists of commercial, investment, real estate and mortgage banks in 10 Euro-zone countries. Our results show that the stock prices of banks with stronger local network positions are less sensitive to monetary policy announcements while those of banks with stronger system-wide positions are more sensitive to them.

Keywords: Interbank network topology, Monetary policy, bank’s stock reaction, event study

JEL Classification: E52, E58, G14, G21, L14

Suggested Citation

Mahdavi Ardekani, Aref and Distinguin, Isabelle and Tarazi, Amine, Interbank Network Characteristics, Monetary Policy ‘News’ and Sensitivity of Bank Stock Returns (October 1, 2019). Available at SSRN: https://ssrn.com/abstract=3520689 or http://dx.doi.org/10.2139/ssrn.3520689

Aref Mahdavi Ardekani

University of Paris 1 Pantheon-Sorbonne, CES ( email )

106-112 Boulevard de l'hopital
106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647
France

Université de Limoges, LAPE

5 rue Félix Eboué BP3127
LIMOGES, 87031
France

Isabelle Distinguin (Contact Author)

Université de Limoges, LAPE ( email )

5 rue Félix Eboué BP3127
LIMOGES, 87031
France

Amine Tarazi

University of Limoges - Laboratoire d'Analyse et de Prospectives Économiques (LAPE) ( email )

5 rue Félix Eboué
BP 3127
Limoges Cedex 1, 87031
France

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

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