Impact of the TARP financing choice on existing preferred stock

Stock, Duane

doi:10.1016/j.jcorpfin.2012.07.006

Cited by 36 publications

(19 citation statements)

References 27 publications

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“…Since CPP participants had a better financial health compared to a group of non‐participants, the authors attribute the temporary undervaluation of the CPP banks to a lower level of investor sentiment. Additional evidence provided by Kim and Stock () suggests that some investor groups benefited more than others from CPP. Existing preferred stockholders of smaller participants enjoyed higher returns than those of the initial group of ten banks that were forced to issue preferred stocks.…”

Section: Literature Reviewmentioning

confidence: 96%

The distribution of the Capital Purchase Program funds: Evidence from bank internal capital markets

Mukherjee

Pana

2018

Financial Market

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We investigate the role played by the internal capital markets of bank holding companies in the distribution of the Capital Purchase Program funds to subsidiaries. We find that while all banks used a similar internal capital allocation to support their subsidiaries, program participants transferred more capital to their subsidiaries than nonparticipants. Smaller bank subsidiaries with lower capital and earnings received more capital than other subsidiaries. Our results support the argument that the distribution of capital was done in accordance with regulatory requirements that mandate bank holding companies to act as a source of strength for their subsidiaries.

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Section: Literature Reviewmentioning

confidence: 96%

The distribution of the Capital Purchase Program funds: Evidence from bank internal capital markets

Mukherjee

Pana

2018

Financial Market

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“…Accordingly, Kim () and Kim and Stock () find that senior preferred stockholders significantly benefit from the capital injection, while the announcement of further restrictions on executive compensation negatively affects the recipient stock performance. Ng, Vasvari, and Wittenberg Moerman () show that early recipients are undervalued shortly after the acceptance of funds.…”

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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“…3 See Calomiris and Kahn (2015) and Kim and Stock (2012) for a thorough analysis of the different phases of TARP. 4 The detailed list of these banks is available upon request.…”

Section: Acknowledgmentsmentioning

confidence: 99%

“…See Calomiris and Kahn () and Kim and Stock () for a thorough analysis of the different phases of TARP.…”

mentioning

confidence: 99%

“Too‐Small‐To‐Survive” versus “Too‐Big‐To‐Fail” banks: The two sides of the same coin

Grammatikos

Papanikolaou

2018

Financial Market

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In the recent crisis, the U.S. authorities bailed out numerous banks through TARP, whilst let many others to fail as going concern entities. Even though both interventions fully protect depositors, a bail out represents an implied subsidy to shareholders, which is not yet the case with closures where creditors are not subsidised. We investigate this non‐uniform policy, demonstrating that size and not performance is the decision variable that endogenously determines one threshold below which banks are treated as TSTS by regulators and another one above which are considered to be TBTF. We, hence, provide a pair of economic rather than regulatory cut‐offs for TBTF and TSTS banks. The shareholders and the other uninsured creditors of a distressed bank are not bailed out if the bank is considered to be TSTS. We further document that the less complex a bank is, the less likely is to be bailed out and, hence, to have all of its creditors protected.

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Impact of the TARP financing choice on existing preferred stock

Cited by 36 publications

References 27 publications

The distribution of the Capital Purchase Program funds: Evidence from bank internal capital markets

The distribution of the Capital Purchase Program funds: Evidence from bank internal capital markets

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

“Too‐Small‐To‐Survive” versus “Too‐Big‐To‐Fail” banks: The two sides of the same coin

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