Abstract
Abstract This study examines the impact of the establishment of the Federal Reserve's source of strength policy on bank holding companies (BHCs). No significant change in share price or systematic risk was detected for BHCs with all healthy bank subsidiaries. In contrast, those BHCs with financially troubled bank subsidiaries experienced declines m share price and increases in systematic risk coinciding with the establishment of the policy. In addition, it was found that the negative wealth effect was detected in connection with the Fed's charge against Hawkeye Bancorp of failing to serve as a source of strength and not in response to its subsequent source of strength policy statement.
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