The effects of DIDMCA on bank stockholders' returns and risk

In this paper we examine the effects of the 1980 DIDMCA on bank stockholders' returns and risk. While at the time of the announcement both commercial banks and thrifts appeared to benefit (measured by abnormal returns), over a longer period of time surrounding the announcement week, it is evident that thrift stockholders were the primary beneficiaries of the acts passage. When the effects of DIDMCA on risk was analysed, it was found that after the act's passage the (total) return risk of both money center and regional banks increased while that for thrifts decreased. However, some of the beneficial effects of the Act appear to have been mitigated by an increase in the absolute size of unexpected interest-rate risk in the post- enactment period.