The objective of this study is to analyse the differential impact that the main events in the implementation of Brexit have had on the European banking sector, and attempt to identify whether said impact has been different for UK and European banks. To do this, we selected a sample of UK banks listed on the stock exchange and a control group composed of banks belonging to European countries of a similar size to the UK banks. We used event study methodology to determine the impact, which was measured by the market reaction. The obtained results allow us to state that UK banks reacted differently from European banks in response to the same events that have defined the path of Brexit, and generally more negatively.
Policy Implications
- By analysing the behaviour of stock prices, policy makers can get some insights about market expectations regarding the economic impact of Brexit, not only in the UK but also in European countries.
- Regulators should keep in mind the UK and European banking reaction to Brexit as a benchmark for countries trying to leave EU in the future.
- Financial authorities would need to take into account the unintended effect of Brexit on stock markets in order to enhance the European financial stability.
- Economic authorities should consider the undesired effect on the markets of the individual economic interests of the countries, in order to improve the global competitiveness of the European countries.
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