The wealth effects of capital structure changes by Japanese banks

Abstract

Banks in the industrialized world are moving toward a new international capital standard. The new BIS or Basle standard establishes higher levels of capital and requires increased sales of securities by Japanese banks. This study measures the wealth impacts and costs of selling new capital issues by 27 Japanese banks, containing the largest banks in the world. There are significant differences in the wealth impacts of these sales from those of U.S. banks and the wealth effects of these sales by Japanese banks are opposite from those suggested by finance theory. An explanation for these differences is presented.