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Effects of Government Interventions on Bank Performance

Author

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  • Sona Siva

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)

Abstract

This paper evaluates the effects of government bailout policies on bank performance in the EU banking sector. Using a unique dataset of government supports, I identify banks which received state support in years 2008-2014 and corresponding control group of banks. I apply difference-in-differences method and extend it by propensity score matching and inverse probability of weighting methods to account for non-randomness of a treatment. My results suggest that aided banks overtook non-aided ones in terms of lending activity in both, the EU Core and EU Periphery, but it was accompanied by increased non-performing loans ratio (NPL) in the EU Periphery. Finally, I show these results differ from the developments in the US. TARP recipients improved their capital adequacy compared to non-intervened banks and returned to pre-crisis level in terms of NPL and profitability.

Suggested Citation

  • Sona Siva, 2023. "Effects of Government Interventions on Bank Performance," Working Papers IES 2023/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2023.
    • Handle: RePEc:fau:wpaper:wp2023_20
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/6772
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    More about this item

    Keywords

    bailout; financial crisis; bank performance;
    All these keywords.

    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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