The effect of inflation and the failure of Silicon Valley bank on shareholder wealth

Das, Bijoy Chandra and Hasan, Fakhrul and Sutradhar, Soma Rani and Obeidat, Muhanned Ali (2026) The effect of inflation and the failure of Silicon Valley bank on shareholder wealth. Review of Financial Economics, 44 (2). ISSN 1058-3300

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Abstract

This study examines how the collapse of Silicon Valley Bank (SVB) and heightened inflation affected shareholders wealth in U.S. financial institutions. Using daily stock returns from February 15 to March 29, 2023, we calculate abnormal and cumulative abnormal returns to measure market reactions. Applying ordinary least squares (OLS) and difference‐in‐differences methods, we record a substantial reduction in shareholder wealth linked to SVB bankruptcy, exacerbated by inflationary pressures. These results highlight the systemic nature of financial shocks, where distress in individual institution can transmit broadly across markets. Our findings enhance the literature on financial institutions by shedding the light on the protective benefits of diversification diminishing during extreme adverse events. For policymakers, investors, and firms, the findings underscore the importance of monitoring systemic risk and strengthening resilience against contagion effects in periods of heightened uncertainty.

Item Type:	Article
Identification Number:	10.1002/rfe.70041
Dates:	Date Event 5 February 2026 Accepted 15 February 2026 Published Online
Uncontrolled Keywords:	CAR, inflation, shareholder wealth, SVB collapse, US banks
Subjects:	CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance
Divisions:	Business School > Accountancy, Finance and Economics
Depositing User:	Gemma Tonks
Date Deposited:	25 Feb 2026 13:42
Last Modified:	25 Feb 2026 13:42
URI:	https://www.open-access.bcu.ac.uk/id/eprint/16887

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