'Escaping TARP'

Wilson, Linus; Wu, Yan Wendy

doi:10.2139/ssrn.1619689

Cited by 17 publications

(24 citation statements)

References 12 publications

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“…However, after including the 29 firms repaying in 2010, we find significant relations with total pay and change‐in‐control agreements. Wilson and Wu (2012) find a different result on salary but similar results on equity and total pay. They do not examine our other measures of pay.…”

mentioning

confidence: 64%

Executive Compensation Restrictions: Do They Restrict Firms’ Willingness to Participate in TARP?

Cadman¹,

Carter²,

Lynch

2012

Business Fin & Account

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We examine the implications of regulatory intervention in pay‐setting, by studying whether executive compensation restrictions associated with the Troubled Asset Relief Program (TARP) influence banks’ participation in the program. We find that banks more likely to be impacted by the restrictions are less likely to participate in TARP. Among banks accepting funds, we find that the likelihood of repaying before the end of 2009 is positively related to CEO incentive compensation. We find greater subsequent executive turnover and lower pay increases in banks accepting funds, consistent with concerns about talent drain. We also find that proxies for self‐serving behavior are related to declining funds, suggesting pay preservation as a potential motive. Despite the motives behind declining funding, we find no evidence that the restrictions limited the objectives of TARP based on banks’ financial health or lending and may have allowed the government to allocate funds more effectively.

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mentioning

confidence: 64%

Executive Compensation Restrictions: Do They Restrict Firms’ Willingness to Participate in TARP?

Cadman¹,

Carter²,

Lynch

2012

Business Fin & Account

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“…Similarly, Cordella and Yeyati () argue that in the case of extreme adverse macroeconomic conditions, the optimal policy is to commit ex ante to bail out insolvent institutions. Wilson and Wu (, ) consider the type of capital injection. They analyze the effectiveness of buying troubled assets, buying preferred stock, or buying common stock and conclude that buying “common stock is always the most ex ante and ex post efficient type of capital infusion regardless of whether the bank volunteers for the recapitalization” (p. 3) while buying preferred stock is the least efficient.…”

Section: Literaturementioning

confidence: 99%

The U.S. Treasury's Capital Purchase Program: Treasury's Selectivity and Market Returns Across Weak and Healthy Banks

Carow

Salotti

2014

J of Financial Research

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We evaluate firms that voluntarily participated in the Treasury's Capital Purchase Plan (CPP), focusing on the market impact of their decision to participate. For healthy firms, abnormal stock returns are negative. For weak firms, CPP was a cheap source of funding, as demonstrated by their significant positive returns. Despite gains for weak firms, not all were permitted to participate. The Treasury made funding available to institutions with low levels of capital only if they also had better performing loan portfolios. Providing further evidence of the Treasury's selectivity, weak firms not participating in the CPP had significantly lower long‐term returns than did weak firms that participated.

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“…Entry into the program was also associated with restrictions on executive pay and dividends payouts, in part to ensure that bank capital was rebuilt from retained earnings. Bayazitova and Shivdasani (2012) and Wilson and Wu (2012) find that banks with high levels of CEO pay were more likely to exit TARP early. Furthermore, Cadman, Carter and Lynch (2012) find that firms that would have been relatively more affected by the associated pay restrictions were less likely to accept TARP.…”

Section: Tarp and Aggregate Foreign Lendingmentioning

confidence: 97%

Does Government Intervention Affect Banking Globalization?

Kleymenova

Rose²,

Wieladek

2016

Journal of the Japanese and International Economies

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Using data from British and American banks, we provide empirical evidence that government intervention affects the global activities of individual banks along three dimensions: depth, breadth and persistence. We examine depth by studying whether a bank's preference for domestic, as opposed to external, lending (funding) changes when it is subjected to a large public intervention, such as bank nationalization. Our results suggest that, following nationalization, non-British banks allocate their lending away from the UK and increase their external funding. Second, we find that nationalized banks from the same country tend to have portfolios of foreign assets that are spread across countries in a way that is far more similar than those of either private banks from the same country or nationalized banks from different countries, consistent with an impact on the breadth of globalization. Third, we study the Troubled Asset Relief Program (TARP) to examine the persistence of the effect of large government interventions. We find weak evidence that upon entry into the TARP, foreign lending declines but domestic does not. This effect is observable at the aggregate level, and seems to disappear upon TARP exit. Collectively, this evidence suggests that large government interventions affect the depth and breadth of banking globalization, but may not persist after public interventions are unwound.

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'Escaping TARP'

Cited by 17 publications

References 12 publications

Executive Compensation Restrictions: Do They Restrict Firms’ Willingness to Participate in TARP?

Executive Compensation Restrictions: Do They Restrict Firms’ Willingness to Participate in TARP?

The U.S. Treasury's Capital Purchase Program: Treasury's Selectivity and Market Returns Across Weak and Healthy Banks

Does Government Intervention Affect Banking Globalization?

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