Who Loses Most When Big Banks Suddenly Fail? Evidence from Silicon Valley Bank Collapse

Abstract

We analyze the market reaction of 137 Silicon Valley Bank (SVB) depositors and 251 SVB borrowers to the bank's collapse. Depositor shares experience a -5.12% abnormal return (AR) on the event date (March 10, 2023), and a -12.38% cumulative abnormal return (CAR) over a 30-day post-event window. More surprisingly, the borrowers also experience a similar event-day AR (-4.16%) and an even worse 30-day post-event CAR (-13.47%). SVB clients have worse CARs if they are smaller, with higher cash holdings, or with lower market-to-book ratios. These results indicate that borrowers appear to suffer more than depositors from SVB's failure.