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Did capital infusions enhance bank recovery from the great recession?

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  • Liu, Wei
  • Kolari, James W.
  • Kyle Tippens, T.
  • Fraser, Donald R.
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    Abstract

    This paper investigates the long-run recovery experience of US banks that received capital infusions under the Capital Purchase Program (CPP), a part of the Troubled Asset Relief Program (TARP). Based on a dynamic recovery model, our results show that recovering CPP banks tended to be in better financial condition than other CPP banks. Long-run event study analyses of common stock prices reveal that, in the quarter after repayment of TARP funds, CPP banks experienced economically large and significant buy-and-hold wealth gains of 14%, equivalent to approximately $329billion. We conclude that TARP was successful in fostering bank financial and stock price recovery.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 37 (2013)
    Issue (Month): 12 ()
    Pages: 5048-5061

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    Handle: RePEc:eee:jbfina:v:37:y:2013:i:12:p:5048-5061

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Bank condition; Regulatory policy; TARP;

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