Limited attention has been paid to the comparative fate of banks benefiting from TARP
Capital Purchase Program (CPP) funding and less fortunate banks subject to FDIC
resolution. We address this omission by investigating two core issues.
One is whether
commercial banks that ended up being subject to FDIC resolution received CPP funds.
The other is whether the non-allocation of CPP funds forced viable commercial banks
into FDIC receivership. Our findings show almost no overlap between CPP-funded and
FDIC-resolved commercial banks, but we provide evidence that a significant number of
FDIC-resolved banks could have avoided receivership if they had been allocated CPP
funding. By comparing estimated funding and resolution costs we also show that bailing out more banks would have been cost-efficient. While our results do not allow for any policy suggestion on the optimality of bail-outs per se, they suggest that once a bail-out program is already on the table, it is better to err on the side of rescuing too many rather than too few banks.
Using a hand-collected dataset, we document that firms take more risks when one of their directors experiences a corporate bankruptcy at another firm where they concurrently serve as a director. This increase is concentrated among directors...Read more
In firms with multiple blockholders governance via exit is affected by how blockholders react to each others' exit. Institutional investors, who hold the majority of equity blocks, are heterogeneous in their incentives. How do these incentives...Read more
In order to favor shareholder investment over a longer time horizon, Italy introduced loyalty shares in late 2014, which allow double voting rights after a two-year continuous holding period. Italian listed firms which adopted loyalty shares (...Read more
Credit ratings have been shown to be imperfect and sometimes biased measures of risk. Has this affected their use in unregulated settings? Using textual analysis, we measure the use of credit ratings in investment mandates of fixed income mutual...Read more