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The light and dark side of TARP

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  • Farruggio, Christian
  • Michalak, Tobias C.
  • Uhde, Andre

Abstract

This paper empirically investigates the impact of the first announcement of TARP, the announcement of revised TARP, respective capital infusions under TARP–CPP and capital repayments on changes in shareholder value and the risk exposure of supported US banks. Our analysis reveals a light and a dark side of TARP. While announcements as well as capital repayments may provoke positive wealth effects and a decrease in bank risk, equity capital injections to banks are observed to be a severe impediment to restore market confidence and financial stability. Furthermore, while TARP announcements and capital injections may increase systemic risk, no significant effect on systemic risk is found for capital repayments.

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Bibliographic Info

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

Volume (Year): 37 (2013)
Issue (Month): 7 ()
Pages: 2586-2604

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:7:p:2586-2604

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

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Keywords: Financial crisis; TARP; Market efficiency; Event study;

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Cited by:
  1. Liu, Wei & Kolari, James W. & Kyle Tippens, T. & Fraser, Donald R., 2013. "Did capital infusions enhance bank recovery from the great recession?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5048-5061.

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