The effects of regulatory announcements on risk and return: the Vietnamese experience

Abstract

Purpose The purpose of this paper is to test the effects of financial regulatory announcements on risk and return in the Vietnamese equity market. Design/methodology/approach The event study methodology is used for the return analysis, and asset pricing models are adjusted for the risk analysis. Various robustness tests are used, including the Corrado non-parametric ranking test and the Chesney et al. non-parametric conditional distribution test, as well as GARCH, TARCH, EGARCH and PARCH specifications for the risk models. Findings The authors find evidence for both negative and positive reactions as well as risk shifting behaviour in the form of a diamond risk structure. Originality/value This paper fills a major gap in the literature by investigating the market’s reaction to bank regulatory announcements across financial and non-financial sectors in the Vietnamese equity market.