What do we know about the impact of government interventions in the banking sector? An assessment of various bailout programs on bank behavior

Hryckiewicz, Aneta

doi:10.1016/j.jbankfin.2014.05.009

Cited by 75 publications

(36 citation statements)

References 59 publications

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“…In the last two decades, more studies have examined the impact of political instability risk on economic growth (Aisen & Veiga, ; Alesina et al, ; Brunetti, ; Carmignani, ; Gurgul & Lach, ; Jong‐A‐Pin, ; Tabassam, Hashmi, & Rehman, ; Uddin et al, ), inflation (Aisen & Veiga, , ; Carmignani, ), investment (mostly foreign direct investment; Alesina & Perotti, ; Asiedu, ; Burger, Ianchovichina, & Rijkers, ; Busse & Hefeker, ; Dutta & Roy, ), the probability of debt default (country risk; Balkan, ; Citron & Nickelsburg, ; Hoti, ; Hoti & McAleer, ; Timurlenk & Kaptan, ), and bank bailouts (Vaugirard, ), whereas the risk‐taking was examined with regarding political system (Ashraf, ; Bitar et al, ; Bordo & Rousseau, ), corruption (Chen, Jeon, Wang, & Wu, ), political transition (Ghosh, ), bank regulation (Ashraf, Arshad, & Hu, ; Borio & Zhu, ; González, ; Houston, Lin, Lin, & Ma, ; Jin, Kanagaretnam, Lobo, & Mathieu, ; Laeven & Levine, ; Samet, Boubakri, & Boubaker, ; Silva, Guerra, Tabak, & Miranda, ), government interventions (Hryckiewicz, ), national culture (Ashraf, Zheng, & Arshad, ; Boubakri, Mirzaei, & Samet, ; Eichler & Sobański, ; Mourouzidou‐Damtsa et al, ), and monetary policy (Chen, Wu, Jeon, & Wang, ; Delis & Kouretas, ).…”

Section: Introductionmentioning

confidence: 99%

“…Systemic banking crises have placed enormous pressure on local governments to intervene. To examine the effect of this intervention, Hryckiewicz (2014) found that, in general, government interventions have a negative impact on banking sector stability, and they significantly increase their risk. Additionally, Song and Thakor (2012) studied the influence of the political intervention on a financial system consisting of banks and financial markets.…”

Section: Introductionmentioning

confidence: 99%

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The impact of political instability on risk‐taking in the banking sector: International evidence using a dynamic panel data model (System‐GMM)

2019

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This paper contributes to the existing literature by investigating the impact of political instability risk on risk‐taking in the banking sector of 75 countries, which is the first attempt for this nexus to the best of our knowledge. The dynamic panel data model (System‐GMM) showed that political instability risk significantly increases risk‐taking in the banking sector. Besides, corruption levels and government ineffectiveness are the most important channels of political instability that affect the banking sector risk. The results also actively support the “too big to fail” hypothesis. Finally, the robustness results confirm the conclusions derived from the baseline System‐GMM model.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The impact of political instability on risk‐taking in the banking sector: International evidence using a dynamic panel data model (System‐GMM)

2019

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“…In the first place, those state-funded bank bailouts triggered an unprecedented deterioration in public finances of the world"s major advanced economies in a peacetime period (Hryckiewicz 2014). 3 In the second place, shrinking public finances provoked fiscal imbalances in the euro area, reflected in the unprecedented increase in sovereign credit default swap (SCDS) spreads.…”

Section: Introductionmentioning

confidence: 99%

The quest for banking stability in the euro area: The role of government interventions

Kizys

Paltalidis

Vergos

2016

Journal of International Financial Markets, Institutions and Mo

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Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. AbstractWe build upon a Markov-Switching Bayesian Vector Autoregression (MSBVAR) model to study how the credit default swaps market in the euro area becomes an important chain in the propagation of shocks through the entire financial system. The study sheds light on the regime-dependent interconnectedness between the risk of investing in banking and public sector bonds and provides novel evidence that a rise in sovereign debt, due to the countercyclical fiscal policy measures, is perceived by stock market investors as a burden on growth prospects. We also document that government interventions in the banking sector deteriorate the credit risk of sovereign debt. Higher risk premium required by investors for holding riskier government bonds depresses the sovereign debt market, it impairs banks" balance sheets, and it depresses the collateral value of loans leading to bank retrenchment. The ensuing two-way banking-fiscal feedback loop indicates that government interventions do not necessarily stabilize the banking sector.JEL Classification: C11, C58, G01, G21, G28.

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“…1 For completeness, we note that other TARP studies focus on determinants of the TARP program entry and exit decisions (Bayazitova and Shivdasani, 2012;Duchin and Sosyura, 2012;Wilson and Wu, 2012;Cornett, Li, and Tehranian, 2013;Li, 2013;Duchin and Sosyura, 2014). Other related literature explores the effects of other government interventions on bank risk-taking, lending, and liquidity creation using data from both the US and other countries (Brandao-Marques, Correa, and Sapriza, 2012;Dam and Koetter, 2012;Hryckiewicz, 2014;Berger et al, 2016;Calderon and Schaeck, 2016) and finds either reductions or increases in risk-taking and reductions in credit growth and liquidity creation. 2 A few papers examine the impact of various factors on more than one loan contract term.…”

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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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What do we know about the impact of government interventions in the banking sector? An assessment of various bailout programs on bank behavior

Cited by 75 publications

References 59 publications

The impact of political instability on risk‐taking in the banking sector: International evidence using a dynamic panel data model (System‐GMM)

The impact of political instability on risk‐taking in the banking sector: International evidence using a dynamic panel data model (System‐GMM)

The quest for banking stability in the euro area: The role of government interventions

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

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