Bank government ownership and reaction to SVB collapse: Evidence from emerging markets

Abstract

This study examines the impact of government ownership on bank stock valuations in emerging markets following the collapse of Silicon Valley Bank (SVB). Using 298 banks across 37 emerging markets, we find that banks with higher levels of government ownership experienced smaller declines in stock prices post-SVB collapse. Our results remain robust after controlling for bank-level variables and potential endogeneity concerns. One potential channel for this relationship is through better credit ratings: banks with government ownership tend to have higher government support ratings and better overall ratings and demonstrate a more favorable reaction to the SVB collapse. Our findings highlight the importance of government ownership and financial soundness in mitigating the adverse effects of financial shocks on bank valuations.