Raising Capital When the Going Gets Tough: U.S. Bank Equity Issuance from 2001 to 2014

50 Pages Posted: 15 Aug 2016

See all articles by Lamont Black

Lamont Black

DePaul University - Driehaus College of Business; Center for Financial Services

Ioannis V. Floros

University of Wisconsin - Milwaukee - Department of Finance

Rajdeep Sengupta

Federal Reserve Bank of Kansas City

Date Written: June 2016

Abstract

We analyze equity issuance by publicly-traded U.S. banks during 2001-2014 through exchanges (SEOs), private placements (PIPEs), and TARP. Equity markets were important for bank recapitalization in the crisis, when SEO and PIPE issuance peaked. We find that bank characteristics predict issuance whereas trading indicators influence issuance type. Large, well-capitalized banks with quality loans were more likely to issue. PIPEs served weaker, capital-constrained banks, while SEOs and TARP were selective. Bank illiquidity was another incentive to issue. Banks with lower trading activity and wider spreads were more likely to issue TARP over SEOs. Our findings suggest TARP aided private issuance, which was used to repay TARP.

Keywords: Commercial Banks, Equity Issuance, Financial Crisis

JEL Classification: G21, G28, G32

Suggested Citation

Black, Lamont and Floros, Ioannis V. and Sengupta, Rajdeep, Raising Capital When the Going Gets Tough: U.S. Bank Equity Issuance from 2001 to 2014 (June 2016). Federal Reserve Bank of Kansas City Working Paper No. 16-05, Available at SSRN: https://ssrn.com/abstract=2821966

Lamont Black (Contact Author)

DePaul University - Driehaus College of Business ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States
312-362-5617 (Phone)
312-362-6566 (Fax)

HOME PAGE: http://driehaus.depaul.edu/faculty-and-staff/faculty/Pages/black-lamont.aspx

Center for Financial Services

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States

HOME PAGE: http://https://business.depaul.edu/about/centers-institutes/financial-services/Pages/default.aspx

Ioannis V. Floros

University of Wisconsin - Milwaukee - Department of Finance ( email )

Milwaukee, WI 53201-0742
United States

Rajdeep Sengupta

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

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