Effects of Government Interventions on Bank Performance

Sona Siva
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Sona Siva: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic

No 2023/20, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

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.

Keywords: bailout; financial crisis; bank performance (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2023-06, Revised 2023-06
New Economics Papers: this item is included in nep-ban, nep-eec and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2023_20

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