Bank Stock Performance and Bank Regulation around the
Globe
Matthias Pelster*, Felix Irresberger† and Gregor N.F. Wei߇
We analyze the effect of bank capital, regulation, and supervision on the annual
stock performance of global banks during the period of 1999-2012. We study a
large comprehensive panel of international banks and find that higher Tier 1 capital
decreases a bank’s stock performance over the whole sample period. However,
during turbulent times stocks of more highly capitalized banks perform significantly
better. Additionally, we find strong evidence that banks that are more likely to
receive government bailout during financial distress realize smaller stock
performance. In contrast, we find no convincing evidence that banks that generate
higher non-interest income have a higher performance.
Keywords: Bank stock performance, bank regulation, capital, implicit bailout
guarantee.
JEL Classification: G01, G21.
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* Corresponding author: Otto-Hahn-Str, 6a, D-44227 Dortmund, Germany, e-mail:
matthias.pelster@udo.edu.
† Otto-Hahn-Str. 6a, D-44227 Dortmund, Germany, e-mail: felix.irresberger@tu-dortmund.de.
‡ Otto-Hahn-Str. 6a, D-44227 Dortmund, Germany, e-mail: gregor.weiss@tu-dortmund.de.
All TU Dortmund University