TARP and the long-term perception of risk

Elias Semaan and Pamela Peterson Drake

Journal of Banking & Finance, 2016, vol. 68, issue C, 216-235

Abstract: The Capital Purchase Program (CPP) was intended to enhance capital and preserve lending capacity of banks, but the role of this program in affecting the risk of participating banks has been unresolved. We address this issue by investigating the market’s long-term perception of risk for financial institutions participating in the CPP. Leading up to and including the crisis, the systematic and idiosyncratic variances of the stock returns of all financial firms increased; following CPP, the relative idiosyncratic risk of CPP participants remained higher than for those not participating in CPP for four years following CPP.

Keywords: TARP; Idiosyncratic risk; Risk-taking; Financial industry regulation (search for similar items in EconPapers)
JEL-codes: 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 (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:68:y:2016:i:c:p:216-235

DOI: 10.1016/j.jbankfin.2016.03.010

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