How Does Capital Affect Bank Performance During Financial Crises?

Berger, Allen N.; Bouwman, Christa H. S.

doi:10.2139/ssrn.1739089

Cited by 300 publications

(399 citation statements)

References 45 publications

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“…Compared with previous literature (e.g. Lee and Hsieh, 2013b;Berger and Bouwman, 2013), the coefficients of EQUITY, NLTA and LIQUIDITY in our study are different, but the other findings are similar. Because the coefficients of EQUITY, NLTA and LIQUIDITY on profitability and risk should be uncertain (see Lee and Heish, 2013b), we think that the difference may be due to different sample periods.…”

Section: Discussioncontrasting

confidence: 80%

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How does Bank Capital Affect Bank Profitability and Risk? Evidence from China's WTO Accession

Ning

Lee

2015

China and World Economy

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This paper examines how bank capital affects bank profitability and risk in China, and how its impact differed before and after the nation entered the WTO. Our study uses the dynamic generalized method of moments approach with a panel database containing 171 Chinese commercial banks. We find that bank capital has significant influence on bank profitability and risk, but its impact has declined since China joined the WTO in 2001. For different sized groups, the impact of capital on profitability exhibits a distinct trend. The effects of capital on bank risk are different for large and small banks depending on the risk variables used for the Chinese banking industry.

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Section: Discussioncontrasting

confidence: 80%

“…We modify the methods applied in previous works, such as Altunbas et al (2007), Casu and Girardone (2006), Goddard et al (2004), Lee and Hsieh (2013a) and Berger and Bouwman (2013), to establish the relationship between bank capital and bank profitability (risk), expressed as follows:…”

Section: Methodsologymentioning

confidence: 99%

How does Bank Capital Affect Bank Profitability and Risk? Evidence from China's WTO Accession

Ning

Lee

2015

China and World Economy

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“…They include Capital Adequacy (the ratio of equity capital to GTA), ASSET QUALITY (the fraction of nonperforming loans to total loans), Management Quality (the ratio of overhead expenses to GTA), Earnings (return on assets (ROA), the ratio of the annualized net income to GTA), Liquidity (the ratio of cash to total deposits), and Sensitivity To Market Risk (the ratio of the absolute difference (gap) between short-term assets and short-term liabilities to GTA). We also include other bank characteristics following Bayazitova and Shivdasani (2012), Berger and Bouwman (2013), Duchin and Sosyura (2014), Berger et al (2016), Berger andRoman (2015, 2017), including Bank Size, the log of gross total assets (GTA), HHI Deposits, local deposit concentration, Percent Metropolitan, the percent of bank deposits in metropolitan areas [Metropolitan Statistical Areas (MSAs) or New England County Metropolitan Areas (NECMAs)], Fee Income, the ratio of noninterest income to total income, Diversification, a measure of diversification across sources of income [1 -|(Net Interest Income -Other Operating Income)/(Total Operating Income)| following Laeven and Levine (2007)], and DWTAF, a dummy if a bank received Discount Window (DW) and/or Term Auction Facility (TAF) funding during the crisis. find that banks that received discount window and TAF funds increased their lending.…”

Section: Control Variablesmentioning

confidence: 99%

Do Business Borrowers Benefit from Bank Bailouts?: The Effects of TARP on Loan Contract Terms

Berger¹,

Makaew²,

Roman

2018

Financial Management

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We investigate benefits to business borrowers from bank bailouts, specifically the Troubled Asset Relief Program (TARP). Applying difference‐in‐difference methodology to loan‐level data, we find more favorable borrower contract terms in five dimensions, spread, amount, maturity, collateral, and covenants, suggesting increased credit supply at the intensive margin by bailed‐out banks. Findings are robust to dealing with endogeneity and other issues. Riskier borrowers benefit more, consistent with moral hazard exploitation. Small and unlisted borrowers benefit less, suggesting fewer benefits for financially constrained firms. Benefits accrue to both relationship and nonrelationship borrowers. Results contribute to the research and policy debates on bank bailouts.

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“…We follow Berger and Bouwman (2013) in identifying the financial crises over the period of 2001:Q1 and 2013:Q4. The results are reported in Table 7, Panel A.…”

Section: Dividend Policy and Bank Opacity: The Effects Of The Finanmentioning

confidence: 99%

Dividend policy and bank opacity

Tran

Ashraf

2018

Int. J Fin Econ

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Does dividend policy increase or decrease bank opaqueness? Under the Dividend–Transparency Channel, paying dividends involves banks having greater discipline from the markets due to external financing and reduces private benefits of control, leading to lower earnings management concerns. Under the Dividend–Opacity Channel, due to a hesitancy to change dividend policy, banks have high vocations to engage earnings management to circumvent payout policy restrictions in debt covenants or to keep their dividend target unchanged. Employing a large sample of 2,483 U.S. bank holding companies from 2001:Q1–2013:Q4, the study documents the double‐edged sword of dividends on the discretionary behaviours of banks. Paying dividends makes banks less opaque to compare with nonpayers, which is consistent with the Dividend–Transparency Channel, however among dividend paying banks, excessive dividends involve banks to manage more their numbers, which is consistent with the Dividend–Opacity Channel. The findings are robust under different specifications. The results are of important interest to bank regulators.

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How Does Capital Affect Bank Performance During Financial Crises?

Cited by 300 publications

References 45 publications

How does Bank Capital Affect Bank Profitability and Risk? Evidence from China's WTO Accession

How does Bank Capital Affect Bank Profitability and Risk? Evidence from China's WTO Accession

Do Business Borrowers Benefit from Bank Bailouts?: The Effects of TARP on Loan Contract Terms

Dividend policy and bank opacity

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