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The effects of government bailouts on bank performance in the EU

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  • Sivá, Soňa

Abstract

This paper evaluates the effects of EU government bailout policies in the years 2008–2014 on bank performance using the difference-in-differences and propensity score methods. The findings reveal that bailed-out banks exhibited higher lending activities compared to non-aided banks, both in EU core and EU periphery regions. However, this increase in lending in the EU periphery was accompanied by a rise in non-performing loans. These findings underscore financial market fragmentation during the EU debt crisis and confirm the theory that bailouts, while mitigating credit constraints, may also incentivize excessive risk-taking.

Suggested Citation

  • Sivá, Soňa, 2025. "The effects of government bailouts on bank performance in the EU," Finance Research Letters, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:finlet:v:79:y:2025:i:c:s1544612325004441
    DOI: 10.1016/j.frl.2025.107181
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    References listed on IDEAS

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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