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Anticipating bailouts: the incentive-conflict model and the collapse of the Ohio Deposit Guarantee Fund

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  • Ramon P. DeGennaro
  • James B. Thomson

Abstract

An examination of the effect of the collapse of the Ohio Deposit Guarantee Fund on insured financial institutions in the context of the incentive-conflict model developed by Edward Kane, finding that differences in abnormal returns of FDIC and FSLIC firms tend to reaffirm that taxpayer-funded bailouts are a natural outgrowth of the moral-hazard problem that taxpayers face.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9407.

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Date of creation: 1994
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Handle: RePEc:fip:fedcwp:9407

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Keywords: Ohio Deposit Guarantee Fund ; Bank stocks;

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References

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  1. Stone, Bernell K., 1974. "Systematic Interest-Rate Risk in a Two-Index Model of Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 9(05), pages 709-721, November.
  2. Thomson, James B, 1987. "The Use of Market Information in Pricing Deposit Insurance," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(4), pages 528-37, November.
  3. Cooperman, Elizabeth S & Lee, Winson B & Wolfe, Glenn A, 1992. " The 1985 Ohio Thrift Crisis, the FSLIC's Solvency, and Rate Contagion for Retail CDs," Journal of Finance, American Finance Association, vol. 47(3), pages 919-41, July.
  4. Edward J. Kane & Haluk Unal, 1988. "Modeling Structural and Temporal Variation in the Market's Valuation of Banking Firms," NBER Working Papers 2693, National Bureau of Economic Research, Inc.
  5. Mikkelson, Wayne H. & Partch, M. Megan, 1986. "Valuation effects of security offerings and the issuance process," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 31-60.
  6. Giliberto, Michael, 1985. "Interest Rate Sensitivity in the Common Stocks of Financial Intermediaries: A Methodological Note," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(01), pages 123-126, March.
  7. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
  8. James B. Thomson, 1987. "FSLIC forbearances to stockholders and the value of savings and loan shares," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 26-35.
  9. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December.
  10. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
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Cited by:
  1. Cyree, Ken B & DeGennaro, Ramon P, 2002. " A Generalized Method for Detecting Abnormal Returns and Changes in Systematic Risk," Review of Quantitative Finance and Accounting, Springer, vol. 19(4), pages 399-416, December.
  2. Ying Yan, 1998. "The FDICIA and bank CEOs' pay-performance relationship: an empirical investigation," Working Paper 9805, Federal Reserve Bank of Cleveland.
  3. Jennergren, L. Peter, 2004. "The Effect on Stock Prices of the Swedish Wealth Tax," Working Paper Series in Business Administration 2004:14, Stockholm School of Economics.

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