50 Pages Posted: 26 Dec 2009 Last revised: 19 Sep 2012
Date Written: September 18, 2012
This paper tests whether poorly capitalized banks with troubled loan books are more likely to miss their bailout dividends. Privately held banks with weaker core capital ratios, more charged off loans, more allowances for loan losses, and more non-performing loans are more likely to miss their Troubled Asset Relief Program (TARP) dividends. Banks that issue non-cumulative preferred stock are also more likely to be TARP deadbeats. In addition, banks that missed a bailout dividend in the prior quarter are significantly more likely to miss the next bailout dividend.
Keywords: bailout, banking, debt overhang, Capital Purchase Program, Emergency Economic Stabilization Act, lending, preferred stock, subordinated debt, TARP
JEL Classification: G21, G28, G38
Suggested Citation: Suggested Citation
Wilson, Linus, TARP’s Deadbeat Banks (September 18, 2012). Review of Quantitative Finance and Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1527270 or http://dx.doi.org/10.2139/ssrn.1527270