Thomas Philippon () and
Philipp Schnabl ()
No 14929, NBER Working Papers from National Bureau of Economic Research, Inc
We analyze government interventions to recapitalize a banking sector that restricts lending to firms because of debt overhang. We find that the efficient recapitalization program injects capital against preferred stock plus warrants and conditions implementation on sufficient bank participation. Preferred stock plus warrants reduces opportunistic participation by banks that do not require recapitalization, while conditional implementation limits free riding by banks that benefit from lower credit risk because of other banks' participation. Efficient recapitalization is profitable if the benefits of lower aggregate credit risk exceed the cost of implicit transfers to bank debt holders.
JEL-codes: G01 G2 G28 G33 G38 H0 H2 H81 (search for similar items in EconPapers)
Note: AP CF EFG LE ME PE
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (11) Track citations by RSS feed
Published as Thomas Philippon & Philipp Schnabl, 2013. "Efficient Recapitalization," Journal of Finance, American Finance Association, vol. 68(1), pages 1-42, 02.
Downloads: (external link)
Journal Article: Efficient Recapitalization (2013)
Working Paper: Efficient Recapitalization (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:14929
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Series data maintained by ().