Efficient Recapitalization

Philippon, Thomas; Schnabl, Philipp

doi:10.1111/j.1540-6261.2012.01793.x

Cited by 150 publications

(53 citation statements)

References 59 publications

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“…Even if this is taken at face value, does it absolve the government from the responsibility of dealing with the crisis? Banking problems can affect the sovereign and vice versa (Gennaioli et al, 2014;Philippon and Schnabl (2013), Acharya et al, forthcoming) and the government should have been a lot more proactive in dealing with the problem.…”

Section: Politicsmentioning

confidence: 99%

Cyprus: from boom to bail-in

Michaelides

2014

Econ Policy

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This is a case study of how a country nearly reached bankruptcy in March 2013, within five years of entering the eurozone. The magnitude of the requested assistance is extremely large relative to GDP (100%) and studying this event provides useful lessons for avoiding such crises in the future. The crisis resulted from a worsening European economic environment (especially in Greece), bad choices with regards to public finances, weak corporate governance within the local banking sector, inadequate and/or difficult regulation of cross-border banking, worsening competitiveness, and bad political decisions at the European and, especially, the local (Cypriot) level. Local politics, reflected in short-term political calculations and/or inadequate understanding of the magnitude of the crisis, delayed corrective action for 18 months until election time, making a bad situation almost impossible to deal with. Overconfidence can be one behavioural explanation for why local politicians ignored the dramatic costs of inaction.--Alexander Michaelides

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Section: Politicsmentioning

confidence: 99%

Cyprus: from boom to bail-in

Michaelides

2014

Econ Policy

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“…Our article is closely related to Philippon and Schnabl (), who also investigate how policy makers should recapitalise firms that suffer from a debt overhang. The difference to our article is twofold.…”

Section: Introductionmentioning

confidence: 94%

“…The difference to our article is twofold. First, although dedicated to banks, the analysis by Philippon and Schnabl () is applicable to non‐financial and financial firms alike. In contrast, we account explicitly for the causes and effects of bank runs.…”

Section: Introductionmentioning

confidence: 99%

Government interventions in banking crises: effects of alternative schemes on bank lending and risk taking

Dietrich

Hauck

2012

Scottish J Political Eco

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We analyse the effects of policy measures to stop the fall in loan supply following a banking crisis. We apply a dynamic framework in which a debt overhang induces banks to curtail lending or choose a fragile capital structure. Government assistance conditional on new banking activities, like on new lending or on debt and equity issues, allow banks to influence the scale of assistance and externalise risks, implying overinvestment or excessive risk taking or both. Assistance without reference to new activities, like granting lump sum transfers or establishing bad banks, does not generate adverse incentives, but may have higher fiscal costs.

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“…The academic studies addressing the use of CPP preferred stock to make loans are such as: Bebchuk and Goldstein (2008), Philippon and Schnabl (2009), Wilson (2009), Taliaferro (2009), Li (2010, and Wilson and Wu (2010a). This literature attempts to address policymakers' concerns that TARP capital injections were used to increase credit and boost economic growth.…”

Section: Review Of the Existing Literaturementioning

confidence: 99%

TARP's dividend skippers

Georgieva

Wilson

2013

IJFSM

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Most of the banks receiving capital injections from the Troubled Asset Relief Programme (TARP) issued preferred stock to taxpayers. This paper presents the factors that affect publicly traded banks' ability to pay the scheduled TARP preferred stock dividends. Smaller banks with weaker capital ratios and more problem loans are significantly more likely to suspend payments of their bailout dividends.

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Efficient Recapitalization

Cited by 150 publications

References 59 publications

Cyprus: from boom to bail-in

Cyprus: from boom to bail-in

Government interventions in banking crises: effects of alternative schemes on bank lending and risk taking

TARP's dividend skippers

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