Did TARP Banks Get Competitive Advantages?

73 Pages Posted: 28 May 2013 Last revised: 15 Aug 2014

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Raluca A. Roman

Federal Reserve Bank of Philadelphia

Date Written: October 7, 2013

Abstract

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

Berger, Allen N. and Roman, Raluca A., Did TARP Banks Get Competitive Advantages? (October 7, 2013). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2270811 or http://dx.doi.org/10.2139/ssrn.2270811

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Raluca A. Roman

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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