One feature of the Dodd-Frank Act is the elimination of too-big-to-fail (TBTF) banks. TBTF is a government guarantee of large banks that has been shown to increase the value of these banks, so removing the guarantee should result in a price decline of TBTF bank stock. Using event study methods, we find very limited reaction to the process of eliminating TBTF. Specifically, there is limited reaction among the largest banks and banks receiving special attention, such as Systemically Important Financial Institutions (SIFI) banks. Instead, smaller banks not receiving special attention show some evidence of negative returns with the elimination of TBTF.
This is an author-produced, peer-reviewed version of this article. © 2018, Elsevier. Licensed under the Creative Commons Attribution-Noncommercial-No-Derivative Works 4.0 license. The final, definitive version of this document can be found online at Journal of Economics and Business, doi: 10.1016/j.jeconbus.2018.03.003
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Allen, Kyle D.; Cyree, Ken B.; Whitledge, Matthew D.; and Winters, Drew B. (2018). "An Event Study Analysis of Too-Big-to-Fail After the Dodd-Frank Act: Who is Too Big to Fail?". Journal of Economics and Business, 98, 19-31. http://dx.doi.org/10.1016/j.jeconbus.2018.03.003