Did capital infusions enhance bank recovery from the great recession?

Wei Liu, James W. Kolari, T. Kyle Tippens and Donald R. Fraser

Journal of Banking & Finance, 2013, vol. 37, issue 12, 5048-5061

Abstract: This paper investigates the long-run recovery experience of US banks that received capital infusions under the Capital Purchase Program (CPP), a part of the Troubled Asset Relief Program (TARP). Based on a dynamic recovery model, our results show that recovering CPP banks tended to be in better financial condition than other CPP banks. Long-run event study analyses of common stock prices reveal that, in the quarter after repayment of TARP funds, CPP banks experienced economically large and significant buy-and-hold wealth gains of 14%, equivalent to approximately $329billion. We conclude that TARP was successful in fostering bank financial and stock price recovery.

Keywords: Bank condition; Regulatory policy; TARP (search for similar items in EconPapers)
JEL-codes: E65 G01 G12 G22 G28 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:12:p:5048-5061

DOI: 10.1016/j.jbankfin.2013.09.008

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