The Distribution of the Capital Purchase Program Funds: Evidence from Bank Internal Capital Markets

19 Pages Posted: 15 Oct 2018

See all articles by Tarun Mukherjee

Tarun Mukherjee

University of New Orleans

Elisabeta Pana

Central Connecticut State University

Date Written: November 2018

Abstract

We investigate the role played by the internal capital markets of bank holding companies in the distribution of the Capital Purchase Program funds to subsidiaries. We find that while all banks used a similar internal capital allocation to support their subsidiaries, program participants transferred more capital to their subsidiaries than nonparticipants. Smaller bank subsidiaries with lower capital and earnings received more capital than other subsidiaries. Our results support the argument that the distribution of capital was done in accordance with regulatory requirements that mandate bank holding companies to act as a source of strength for their subsidiaries.

Keywords: capital infusion, capital purchase program, internal capital markets

JEL Classification: E61, E63, G12, G14, G18

Suggested Citation

Mukherjee, Tarun and Pana, Elisabeta, The Distribution of the Capital Purchase Program Funds: Evidence from Bank Internal Capital Markets (November 2018). Financial Markets, Institutions & Instruments, Vol. 27, Issue 4, pp. 125-143, 2018. Available at SSRN: https://ssrn.com/abstract=3265429 or http://dx.doi.org/10.1111/fmii.12095

Tarun Mukherjee (Contact Author)

University of New Orleans ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States
5042807146 (Phone)

Elisabeta Pana

Central Connecticut State University ( email )

1615 Stanley Street
New Britain, CT 06050
United States

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