Did TARP Banks Get Competitive Advantages?
73 Pages Posted: 28 May 2013 Last revised: 15 Aug 2014
Date Written: October 7, 2013
We investigate whether the Troubled Assets Relief Program (TARP) gave recipients competitive advantages. Using a difference-in-difference (DID) approach, we find that: 1) TARP recipients received competitive advantages and increased both their market shares and market power; 2) results may be driven primarily by the safety channel (TARP banks may be perceived as safer), which is partially offset by the cost disadvantage channel (TARP funds may be relatively expensive); and 3) these competitive advantages are primarily or entirely due to TARP banks that repaid early. These results may help explain other findings in the literature and yield important policy implications.
Keywords: TARP, Banks, Bailouts, Capital support, Competition
JEL Classification: G21, G28, L41, L53
Suggested Citation: Suggested Citation