The effects of government bailouts on bank performance in the EU

Soňa Sivá

Finance Research Letters, 2025, vol. 79, issue C

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.

Keywords: Bailout; Financial crisis; Bank performance (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:79:y:2025:i:c:s1544612325004441

DOI: 10.1016/j.frl.2025.107181

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