This paper studies the factors that were associated with a bank's early exit from the Troubled Asset Relief Program (TARP) in 2009. Executive pay restrictions were often a rationale cited for early TARP exit, and high levels of CEO pay in 2008 were associated with banks being significantly more likely to escape TARP. In addition, we find that larger publicly traded banks with better accounting performance, the stronger capital ratios, and fewer troubled loans and other assets exited early. Banks that raised private capital in 2009 were significantly more likely to return the taxpayers’ money early. The original eight TARP recipients, which received $165 billion of the $245 billion passed out, had weak tangible common equity ratios at the end of 2008, relative to other TARP recipients. Those eight banks raised common equity capital in 2009, and all at least partially exited the government's embrace.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Krainer, Robert, 2009. "Portfolio and financing adjustments for U.S. banks: Some empirical evidence," Journal of Financial Stability, Elsevier, vol. 5(1), pages 1-24, January.
- Daniel Bergstresser & Thomas Philippon, 2003.
"CEO incentives and earnings management,"
862, Federal Reserve Bank of Chicago.
- John, Kose & John, Teresa A., 2006. "Managerial incentives, derivatives and stability," Journal of Financial Stability, Elsevier, vol. 2(1), pages 71-94, April.
- Thomas Philippon & Philipp Schnabl, 2009.
NBER Working Papers
14929, National Bureau of Economic Research, Inc.
- Veronesi, Pietro & Zingales, Luigi, 2010.
Journal of Financial Economics,
Elsevier, vol. 97(3), pages 339-368, September.
- Efendi, Jap & Srivastava, Anup & Swanson, Edward P., 2007. "Why do corporate managers misstate financial statements? The role of option compensation and other factors," Journal of Financial Economics, Elsevier, vol. 85(3), pages 667-708, September.
- Courtadon, Georges, 1982. "The Pricing of Options on Default-Free Bonds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(01), pages 75-100, March.
- Acharya, Viral V., 2009.
"A theory of systemic risk and design of prudential bank regulation,"
Journal of Financial Stability,
Elsevier, vol. 5(3), pages 224-255, September.
- Acharya, Viral V, 2009. "A Theory of Systemic Risk and Design of Prudential Bank Regulation," CEPR Discussion Papers 7164, C.E.P.R. Discussion Papers.
- Kane, Edward J. & Klingebiel, Daniela, 2004. "Alternatives to blanket guarantees for containing a systemic crisis," Journal of Financial Stability, Elsevier, vol. 1(1), pages 31-63, September.
- Brennan, Michael J. & Schwartz, Eduardo S., 1977. "Savings bonds, retractable bonds and callable bonds," Journal of Financial Economics, Elsevier, vol. 5(1), pages 67-88, August.
- Linus Wilson & Yan Wu, 2010. "Common (stock) sense about risk-shifting and bank bailouts," Financial Markets and Portfolio Management, Springer, vol. 24(1), pages 3-29, March.
When requesting a correction, please mention this item's handle: RePEc:eee:finsta:v:8:y:2012:i:1:p:32-42. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.