Did TARP Banks Get Competitive Advantages?. (24th February 2016)

• Record Type: Journal Article
• Authors: Berger, Allen N.; Roman, Raluca A.
• Is Part Of: Journal of financial and quantitative analysis. Volume 50:Number 6(2016)
• Page Start: 1199
• Page End: 1236
• Publication Date: 2016-02-24
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S0022109015000630
• Languages: English
• ISSNs: 0022-1090

Abstract

Abstract: We investigate whether the Troubled Assets Relief Program (TARP) gave recipients competitive advantages. Using a difference-in-difference (DID) approach, we find that: i) TARP recipients received competitive advantages and increased both their market shares and market power; ii) results may be driven primarily by the safety channel (TARP banks may be perceived as safer), which is partially offset by the cost-disadvantage channel (TARP funds may be relatively expensive); and iii) these competitive advantages are primarily or entirely due to TARP banks that repaid early. These results may help explain other findings in the literature, and yield important policy implications.