TARP's Dividend Skippers

Abstract

Most of the banks receiving capital injections from the Troubled Asset Relief Program (TARP) issued preferred stock to taxpayers. This paper looks at the factors that affect publicly traded banks’ ability to pay the scheduled TARP preferred stock dividends. Smaller banks with weaker capital ratios and more problem loans are significantly more likely to suspend payments of their bailout dividends.

Keywords: bailout, banking, Capital Purchase Program, dividends, Emergency Economic Stabilization Act, hybrid securities, preferred stock, Small Business Lending Fund, trust preferred, TRUPS, TARP

JEL Classification: G21, G28, G38