Banking contagion of Credit Suisse

: analysis of European banks’ share prices

Abstract

This study seeks to comprehensively investigate the immediate market response to the insolvency of Credit Suisse within the European banking sector. Utilizing the event study methodology with the market model, the study analyses the event’s impact on share prices of Banks listed in Europe, employing daily closing prices as the dataset. Additionally, two cross-sectional regression analyses are conducted to explore factors that may drive abnormal returns. The empirical findings of this research reveal a significant negative impact on stock prices following the occurrence of this banking collapse event. The general devaluation observed in this sector is attributed to various factors such as systemic contagion, panic-driven market behaviour, information asymmetries and the resurgence of uncertainty. Furthermore, these reactions are additionally influenced by specific bank characteristics, such as size and profitability. Additionally, the study investigates country-specific variables for a potential linkage. However, no definitive conclusion can be drawn from this analysis.

Date of Award	25 Jan 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Geraldo Cerqueiro (Supervisor)