In the aftermath of the 2007–2009 global financial crisis EU regulators and supervisors attempted to restore the confidence of still fragile financial system. To allow early detection of ailing banks, enhance transparency, and decrease uncertainty of information asymmetry between market players, supervisors disclosed the results of stress tests to breach the information gap in the market. Between 2009 and 2013 the Committee of European Banking Supervisors (CEBS) and the European Banking Authority (EBA) performed and disclosed results on stress tests, capital, and transparency exercises. Using 572 observations of listed banks subject to six cross-border stress tests exercises in Europe, this event study finds that the announcements of the test itself, methodology, and results were informative at aggregated level and led to significant positive market returns. In turn, the exercises were noninformative for the identification of viable and nonviable banks and not sensitive to the business models of the participating banks.
