Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/235547
Authors: 
Mücke, Christian
Pelizzon, Loriana
Pezone, Vincenzo
Thakor, Anjan V.
Year of Publication: 
2021
Series/Report no.: 
SAFE Working Paper No. 316
Abstract: 
We empirically examine the Capital Purchase Program (CPP) used by the US gov- ernment to bail out distressed banks with equity infusions during the Great Recession. We find strong evidence that a feature of the CPP - the government's ability to ap- point independent directors on the board of an assisted bank that missed six dividend payments to the Treasury - helped attenuate bailout-related moral hazard. Banks were averse to these appointments - the empirical distribution of missed payments exhibits a sharp discontinuity at five. Director appointments by the Treasury led to improved bank performance, lower CEO pay, and higher stock market valuations.
Subjects: 
Bank Bailout
TARP
Capital Purchase Program
Dividend Payments
Board Appointments
Bank Recapitalization
JEL: 
G01
G2
G28
G38
H81
Document Type: 
Working Paper

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