Taking TARP Funds Can Be Hazardous to Your Bank's Wealth

17 Pages Posted: 7 Nov 2009

See all articles by Dan J. Jordan

Dan J. Jordan

Valulytics, Inc.

Douglas Rice

Golden Gate University - Ageno School of Business

Jacques Sanchez

Valulytics

Donald H. Wort

California State University, East Bay

Date Written: November 6, 2009

Abstract

This paper examines the market-price to book-value ratio for 588 listed bank stocks as of March 31, 2009. We relate each bank’s market-price to book-value ratio to several fundamental ratios along with whether it took funds from the U. S. Treasury under the Troubled Asset Relief Program (TARP).

The results of this study show that banks who took funds under the TARP program had lower market-price to book-value ratios than banks that refrained from taking such funds. In addition, we found that lower relative costs, higher non-interest income in relation to interest income, lower assets in a non-accrual status and lower owned real estate as a percentage of total assets and higher interest income to total assets ratios explained the banks’ market-price to book-value ratios with high statistical significance.

Keywords: banks, banking, TARP, market price-to-book value, X-Efficiency

JEL Classification: G12, G21

Suggested Citation

Jordan, Dan J. and Rice, Douglas and Sanchez, Jacques and Wort, Donald Henry, Taking TARP Funds Can Be Hazardous to Your Bank's Wealth (November 6, 2009). Available at SSRN: https://ssrn.com/abstract=1501307 or http://dx.doi.org/10.2139/ssrn.1501307

Dan J. Jordan (Contact Author)

Valulytics, Inc. ( email )

PO Box 313
Lynden, WA 98264
United States
(415) 381-3344 (Phone)
(360) 512-3780 (Fax)

HOME PAGE: http://www.valulytics.net

Douglas Rice

Golden Gate University - Ageno School of Business ( email )

536 Mission Street
San Francisco, CA 94105
United States

Jacques Sanchez

Valulytics ( email )

PO Box 313
Lynden, WA 98264
United States
19253838877 (Phone)

Donald Henry Wort

California State University, East Bay ( email )

25800 Carlos Bee Boulevard
Department of Accounting and Finance
Hayward, CA 94542
United States
925-413-6454 (Phone)
925-828-9331 (Fax)

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