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.
Banks are special, and so is the corporate governance of banks and other financial institutions as compared with the general corporate governance of non-banks. Empirical evidence, mostly gathered after the financial crisis, confirms this. Banks...Read more
Stricter enforcement of manager post-employment restrictions that strengthen trade secrets protections also limits managers’ ability to accept better employment opportunities. We find that heightened managerial career concerns due to these...Read more
We examine the link between CEO overconfidence and speed of adjustment (SOA) of cash holdings for listed US firms. We find a negative effect of overconfident CEOs on the SOA. Further, CEO overconfidence increases the asymmetry in the SOA between...Read more
Surveying institutional investors on portfolio firms’ climate risk disclosures, we find that many think climate risk reporting to be as important as traditional financial reporting and that it should be mandatory and more standardized. We find...Read more