Penn square, problem loans, and insolvency risk

Penn square, problem loans, and insolvency risk

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Article ID: iaor201522851
Volume: 9
Issue: 2
Start Page Number: 103
End Page Number: 111
Publication Date: Jun 1986
Journal: Journal of Financial Research
Authors: ,
Keywords: finance & banking, risk
Abstract:

This paper investigates the influence of the failure of Penn Square Bank of Oklahoma City on stock prices within the banking industry. This influence is compared to the results of previous studies of the failures of Franklin National Bank of New York and United States National Bank of San Diego. While each of these earlier studies finds only a transitory impact on bank securities, this paper finds evidence of a structural change in the pricing mechanism for bank stocks after the Penn Square failure.

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