EconPapers    
Economics at your fingertips  
 

An econometric evaluation of bank recapitalization programs with bank- and loan-level data

Kiyotaka Nakashima ()

Journal of Banking & Finance, 2016, vol. 63, issue C, 1-24

Abstract: Public capital injections into the banking system are a comprehensive policy program aimed at reducing the financial risks faced by capital-injected banks, thereby stimulating their lending and profitability. This paper evaluates empirically Japan’s two large-scale capital injections in 1998 and 1999. We begin by extracting the treatment effects of the public injections from bank-level panel data. Using a difference-in-difference estimator in two-way fixed-effects regression models, we find that the public injections significantly reduced the financial risks faced by the capital-injected banks but did not stimulate their lending or profitability. Next, we investigate what factors impeded bank lending after the public injections using a matched sample of Japanese banks and their borrowers. By employing three-way fixed-effects regression models corresponding to the matched sample, we provide evidence that the deterioration of borrowers’ creditworthiness inhibited not only the injected banks but also the noninjected banks from lending more.

Keywords: Public capital injection; Treatment effect; Capital crunch; Default risk difference-in-difference estimator; Three-way fixed-effects model (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426615003027
Full text for ScienceDirect subscribers only

Related works:
Working Paper: An Econometric Evaluation of Bank Recapitalization Programs with Bank- and Loan-level Data (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:63:y:2016:i:c:p:1-24

DOI: 10.1016/j.jbankfin.2015.11.002

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-09-21
Handle: RePEc:eee:jbfina:v:63:y:2016:i:c:p:1-24