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Article: How Legislation Affects Value: The Failure of Credit Card Cap Legislation.
- Article from:
- Financial Management
- Article date:
- September 22, 1999
- Author:
CopyrightCOPYRIGHT 1999 Financial Management Association. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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We examine the credit card cap bill of November 1991. This legislation took only six business days to be formulated, pass in the Senate, and then die unenacted. We find that banks with high credit card exposure experienced significant negative abnormal returns during the period in which the bill looked certain to be enacted. When it became evident that the bill would fail, the banks did not recoup the full value lost.
* Recent finance literature has examined the impact of several regulatory events. One difficulty with these studies is that information tends to develop over a sometimes lengthy period of time. For example, Congress debated and revised the Financial ...