What is the impact of macroprudential policies on specific non-banking sector of the economy?

Details

Supervisors

Candelon, Bertrand

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion, à finalité spécialisée

Abstract

Macro-prudential regulations in the banking sector are becoming more stringent to ensure economic stability and limit systemic crises. These rules focus on the financial sector and are issued by the Basel Committee on Banking Supervision. These changes will also have an indirect impact on the non-financial world, although the main aim of these rules is to adjust to reduce risk. If we tighten credit regulations, fewer companies will be able to obtain financing. The purpose of this paper is to examine whether the announcement of Basel III has had an impact on sector-specific, small-cap US financial firms. First, my literature review will focus on these macroprudential regulations, why they were introduced and how they have evolved. This part will end with a historical context of the time of the announcement of the regulations to see if other elements could have impacted these entities. The empirical part section focuses on an aggregate index to highlight the difference between large and small capitalisation, and then the tests will be carried out on a sample of five small capitalisation companies from the non-financial and technology sectors. The tests will aim to highlight the structural breaks at a specific point in time, and another to locate all the structural breaks around this period. The results show that small caps are more sensitive to changes in regulation. The announcement of the implementation of Basel III in the US created a structural break that had a significant impact on the performance of companies in a particular sector.