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Information Spillover of Bailouts

44 Pages Posted: 18 Aug 2013 Last revised: 1 Feb 2018

Hugh Hoikwang Kim

University of South Carolina, Darla Moore School of Business

Date Written: January 1, 2018

Abstract

This paper examines an information spillover effect of financial institutions’ enrollment in a government bailout program. Analyzing money market funds’ dynamic enrollment status in the U.S. Treasury Temporary Guarantee Program in 2008, this paper finds that funds’ disclosure of enrollment in the bailout program lead to significantly reduced outflows from other non-enrolled funds. Enrolled funds had positive inflows due to stability provided by the government, dominating the negative spillover effect. I address the endogeneity issue of funds’ enrollment status based on survival analysis and an instrumental variable approach. This finding is consistent with the information spillover effect of bailouts; investors extract useful information about financial institution’s underlying stability from their demand for government bailouts.

Keywords: information spillover, bailouts, money market funds

JEL Classification: G01, G14, G28, G32

Suggested Citation

Kim, Hugh Hoikwang, Information Spillover of Bailouts (January 1, 2018). Available at SSRN: https://ssrn.com/abstract=2311542 or http://dx.doi.org/10.2139/ssrn.2311542

Hugh Hoikwang Kim (Contact Author)

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

1014 Greene Street
Columbia, SC 29208
United States

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