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On the Real Effects of Bank Bailouts: Micro-Evidence from Japan

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  • Mariassunta Giannetti

    (Stockholm School of Economics)

  • Andrei Simonov

    (Eli Broad Graduate School of Management, Michigan State University and CEPR)

Abstract

Exploiting the Japanese banking crisis as a laboratory, we provide firm-level evidence on the real effects of bank bailouts. Government recapitalizations result in positive abnormal returns for the clients of recapitalized banks. After recapitalizations, banks extend larger loans to their clients and some firms increase investment, but do not create more jobs than comparable firms. Most importantly, recapitalizations allow banks to extend larger loans to low and high quality firms alike, and low quality firms experience higher abnormal returns than other firms. Interestingly, recapitalizations by private investors have similar effects. Moreover, bank mergers engineered to enhance bank stability appear to hurt the borrowers of the sounder banks involved in the mergers.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2009.103.

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Date of creation: Nov 2009
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Handle: RePEc:fem:femwpa:2009.103

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Keywords: Recapitalization; Merger; Banking Crisis;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Los efectos reales de los rescates bancarios
    by Ramón Mateo in Politikon on 2013-04-01 09:38:59
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Cited by:
  1. Brahim Guizani & Wako Watanabe, 2010. "The Deposit Insurance and the Risk-Shifting Incentive Evidence from the Blanket Deposit Insurance in Japan," Keio/Kyoto Joint Global COE Discussion Paper Series 2010-004, Keio/Kyoto Joint Global COE Program.
  2. Sokolov, V., 2012. "The Impact of Central Bank Liquidity Infusions on Banks with High Level of Foreign Borrowing during the Crisis," Journal of the New Economic Association, New Economic Association, vol. 13(1), pages 51-78.
  3. Levintal, Oren, 2013. "The real effects of banking shocks: Evidence from OECD countries," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 556-578.

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