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Wealth Effect Of Public Fund Injections To Ailing Banks: Do Deferred Tax Assets And Auditing Firms Matter?

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  • NOBUYOSHI YAMORI
  • AYAMI KOBAYASHI

Abstract

This paper examines the wealth effect on other banks by the public fund injection into Resona Bank. This paper finds that the injection initially conveyed the auditing firms' strict stance towards deferred tax assets. More importantly, the procedure that the government employed was regarded by market participants as a too‐big‐to‐fail policy. Therefore, although the Resona injection was effective in obviating a financial crisis, the policy was inevitably accompanied with the moral hazard problem.

Suggested Citation

  • Nobuyoshi Yamori & Ayami Kobayashi, 2007. "Wealth Effect Of Public Fund Injections To Ailing Banks: Do Deferred Tax Assets And Auditing Firms Matter?," The Japanese Economic Review, Japanese Economic Association, vol. 58(4), pages 466-483, December.
    • Handle: RePEc:bla:jecrev:v:58:y:2007:i:4:p:466-483
    DOI: 10.1111/j.1468-5876.2007.00384.x
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    1. Elijah Brewer & Hesna Genay & William C. Hunter & George G. Kaufman, 1999. "Does the Japanese stock market price bank risk? evidence from financial firm failures," Working Paper Series WP-99-31, Federal Reserve Bank of Chicago.
    2. ,, 2004. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 20(2), pages 427-429, April.
    3. Takeo Hoshi & Anil K Kashyap, 2004. "Solutions to the Japanese Banking Crisis: What might work and what definitely will fail," Hi-Stat Discussion Paper Series d04-35, Institute of Economic Research, Hitotsubashi University.
    4. ,, 2004. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 20(1), pages 223-229, February.
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    1. Nakashima, Kiyotaka, 2016. "An econometric evaluation of bank recapitalization programs with bank- and loan-level data," Journal of Banking & Finance, Elsevier, vol. 63(C), pages 1-24.
    2. Pop, Adrian & Pop, Diana, 2009. "Requiem for market discipline and the specter of TBTF in Japanese banking," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(4), pages 1429-1459, November.

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