The light and dark side of TARP |
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Authors: | Christian Farruggio Tobias C Michalak Andre Uhde |
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Institution: | 1. University of Bochum, Department of Management and Economics, 44780 Bochum, Germany;2. University of Paderborn, Department of Taxation, Accounting & Finance, 33098 Paderborn, Germany |
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Abstract: | This paper empirically investigates the impact of the first announcement of TARP, the announcement of revised TARP, respective capital infusions under TARP–CPP and capital repayments on changes in shareholder value and the risk exposure of supported US banks. Our analysis reveals a light and a dark side of TARP. While announcements as well as capital repayments may provoke positive wealth effects and a decrease in bank risk, equity capital injections to banks are observed to be a severe impediment to restore market confidence and financial stability. Furthermore, while TARP announcements and capital injections may increase systemic risk, no significant effect on systemic risk is found for capital repayments. |
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Keywords: | G14 G21 G28 |
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