Abstract

http://ssrn.com/abstract=1483478
 
 

References (54)



 
 

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Efficient Recapitalization


Thomas Philippon


New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Philipp Schnabl


New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

September 1, 2011

Journal of Finance, Forthcoming

Abstract:     
We analyze government interventions to recapitalize a banking sector that restricts lending to firms because of debt overhang. We find that the efficient recapitalization program injects capital against preferred stock plus warrants and conditions implementation on sufficient bank participation. Preferred stock plus warrants reduces opportunistic participation by banks that do not require recapitalization, while conditional implementation limits free riding by banks that benefit from lower credit risk because of other banks' participation. Efficient recapitalization is profitable if the benefits of lower aggregate credit risk exceed the cost of implicit transfers to bank debt holders.

Number of Pages in PDF File: 56

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Date posted: October 6, 2009 ; Last revised: August 9, 2012

Suggested Citation

Philippon, Thomas and Schnabl, Philipp, Efficient Recapitalization (September 1, 2011). Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1483478

Contact Information

Thomas Philippon (Contact Author)
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Philipp Schnabl
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
HOME PAGE: http://pages.stern.nyu.edu/~sternfin/pschnabl/
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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