 Hidden effects of bank recapitalizationsElena Beccalli, Pascal Frantz and Francesca Lenoci LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library Abstract: Given the importance of capital regulation in the banking industry, how and why a bank's behavior reacts to a recapitalization has profound consequences. To this end, we investigate the effects of 306 seasoned equity offerings (SEOs) conducted by listed European banks between 2002 and 2014. We use propensity score matching and find that SEOs lead to asset expansion as opposed to any deleveraging. Further, we find a decrease in lending in the short-term followed by a subsequent increase, a reduction in profitability, and an increase in systemic risk. Regulators might not have fully considered this last negative externality when they imposed the tougher Basel III capital requirements. The effects of SEOs strongly depend on the reasons behind the recapitalizations. Keywords: Banks; Recapitalizations; SEOs; EU; Systemic risk; SIFI; Deleveraging; Lending; Profitability (search for similar items in EconPapers) Published in Journal of Banking and Finance, 1, September, 2018, 94, pp. 297-314. ISSN: 0378-4266 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:89252 Access Statistics for this paper More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC. |
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