Greek Banking Sector Stock Reaction to ECB’s Monetary Policy Interventions

Abstract

Reacting to extreme uncertainty conditions caused by the global financial crisis, the European Central Bank implemented countercyclical strategy, combining conventional and non-traditional monetary policy tools to stabilize financial markets and euro area economies. We study the impact of the euro area monetary authority policy interventions on equity returns of four systemic Greek banks for the period January 2007 to August 2018. In the first step, we collect and classify interventions to several categories. Then, an event study analysis is carried out to evaluate cumulative abnormal returns. In the second step, a panel regression analysis is performed to identify Cumulative Abnormal Return (CAR) determinants. Our results suggest that expansionary conventional monetary policy interventions significantly affect equity returns of Greek banking institutions, assisting the regional banking equity stability. On the other hand, the harmful consequences of Greek debt crisis limited the effectiveness of non-standard measures.