Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237687 
Year of Publication: 
2021
Series/Report no.: 
ECB Working Paper No. 2548
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We investigate asset returns around banking crises in 44 advanced and emerging economies from 1960 to 2018. In contrast to the view that buying assets during banking crises is a profitable long-run strategy, we find returns of equity and other asset classes generally underperform after banking crises. While prices are depressed during crises and partially recover after acute stress ends, consistent with theories of fire sales and intermediary-based asset pricing, we argue that investors do not fully anticipate the consequences of debt overhang, which result in lower long-run dividends. Our results on bank stock underperformance suggest that government-funded bank recapitalizations can often lead to substantial taxpayer losses.
Subjects: 
investments
financial crises
returns
fire sales
JEL: 
G11
G14
G15
G41
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4548-6
Document Type: 
Working Paper

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