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Did TARP Banks Get Competitive Advantages?

Published online by Cambridge University Press:  24 February 2016

Allen N. Berger  and
Raluca A. Roman
Allen N. Berger*
Affiliation:
aberger@moore.sc.edu, University of South Carolina, Moore School of Business, Columbia, SC 29208, Wharton Financial Institutions Center, and European Banking Center
Raluca A. Roman
Affiliation:
raluca.roman@grad.moore.sc.edu, University of South Carolina, Moore School of Business, Columbia, SC 29208.
*
*Corresponding author: aberger@moore.sc.edu
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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.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 50 , Issue 6 , December 2015 , pp. 1199 - 1236
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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