Bank bailouts: lessons to learn when patience is a virtue

Abstract

Purpose -Most recent bank bailouts, from a financial and economic perspective, turn political. This paper seeks to frame ten effective implications/lessons of the most recent bank bailouts of 2007-2009 in the Western economy model when analyzing actual shareholders' value retrenchment or growth opportunities. Design/methodology/approach -The paper uses a literature review and a re-conceptualized framework of event study methodology, secondary data analysis of qualitative and quantitative information. Findings -Recent bank bailouts relate to: global bailout interconnections, economic downturn and liquidity boost, abnormal returns, efficiency recovery, evasion of social costs, new opportunities for M&A, new risk management applications, opportunistic investors and eventually patience. Most important, findings recommend shareholders to grasp opportunities for bargains from bailout banks as well as to harvest their existing investments. At the same time, economic education and control become another important solution.Research limitations/implications -Consequently, as the paper targets most recent bailouts, a still ongoing event, there is a need for extended financial data that could enhance some cause-related solutions after economic recovery. Practical implications -The practicality of the paper refers to guiding management of both government and financial institutions on the choice for reasoning bank bailouts, providing some critical thinking views to investors as well as academics. Originality/value -Research or studies on the most recent financial crises bailouts have not yet been written, due to the process continuation. The novelty of the paper resides not in calculating ratios and interpreting them, but rather in looking more into some interesting strategic moves used to boost shareholders' value.

Number of ATMs, IT investments, bank profitability and efficiency in Greece

“…For recent studies on the structure of Banking sector in Europe, seeYiannaki (2007Yiannaki ( , 2011Yiannaki ( , 2013). 2 During the period 2004-2009 there was a significant post-Olympic dynamic growth in Greece (see Floros 2010), while after 2009 the Greek Banking system was influenced by the international economic crisis (see National Bank of Greece 2009).We don't consider data after 2009 as the structure of the Greek Banking has been changed a lot due to several M&As.…”

Effect of Government Bailouts on the Bank Performance and Risk Taking within Bailed out Banks

“…Government bailout in the banking industry is conducted with the objective of restoring market confidence and preventing the happening of a systemic banking crisis (Mehran & Thakor, 2011). However, the bailout policies can sometimes end up in moral hazard behaviour of the banks due to the classic problem of information asymmetry (Yiannaki, 2011). There are several practical implications relating to the process of government intervention in the banking industry.…”

“…The too-big-to-fail problem will affect the large banks, while the too-many-tofail effect will have significant implications on the smaller banks. This is where, at the failure of one bank, there will be several other banks, which will face difficulties in an economy (Yiannaki, 2011). Although, the main objective of bailout is stability, it will not always be achieved, as the governments will favour underperforming entities by safeguarding their assets at a high social cost in the long term.…”