Federal Dposit InsuranceCorporation• Center for Financial Researchh
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2012-02
On the Real Effects of Bank Bailouts: Micro-Evidence from Japan
September 2011
Empirical Comparisons and Implied Recovery Rates
kkk
An Empirical
An Empirical Analysis
State-
Efraim Benmel Efraim Benmelech May, 2005
June 20
May , 2005 Asset S2005-14
September 2005
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2012-02
On the Real Effects of Bank Bailouts: Micro-Evidence from Japan
September 2011
Empirical Comparisons and Implied Recovery Rates
kkk
An Empirical
An Empirical Analysis
State-
Efraim Benmel Efraim Benmelech May, 2005
June 20
May , 2005 Asset S2005-14
September 2005
On the Real Effects of Bank Bailouts: Micro-Evidence from Japan
Mariassunta Giannetti Andrei Simonov
September 2011
Abstract. Exploiting the Japanese banking crisis of the 1990s as a laboratory, we investigate the
effects of bank bailouts on the supply of credit and on the valuations and the real performance of
banks’ clients. Consistent with recent theories, our findings indicate that the size of the capital
injections relative to the banks’ initial financial conditions is crucial for the success of bank
bailouts. Capital injections that are sufficiently large to reestablish bank capital requirements
increase the supply of credit and spur investment. In contrast, not only do capital injections that
are too small fail to increase the supply of credit, but they also encourage the evergreening of
non-performing loans and favor investment by unviable “zombie” firms.
Keywords: Recapitalization; merger; banking crisis
JEL Classifications: G21; G34
Acknowledgements. We are grateful to two anonymous referees, Steven Davis (the editor), Arnoud Boot, Kathy
Dewenter, Doug Diamond, Alexander Dyck, George Kaufman, Hong Liu, Randall Morck, Joe Peek, Kasper
Roszbach, Eric Rosengren, Philipp Schnabl, Yishay Yafeh, and conference and seminar participants at the NBER
Summer Institute Project on Market Institutions and Financial Market Risk meeting, Western Finance Association,
the Fifth New York Fed/NYU Stern Conference on Financial Intermediation, the American Economic Association,
the European Finance Association, the Paris Spring Corporate Finance Conference, the Bank of Italy/CEPR
Conference on Money, Credit and Finance, the Bank of Finland/CEPR Conference on the Credit Crunch, the
University of Frankfurt Conference on the Law and Economics of Money and Finance in Times of Financial Crisis,
the Finlawmetrics Conference at Bocconi University, HKUST, the University of Hong Kong, the University of
Zurich, the University of Lugano, the University of Durham, the Stockholm School of Economics, Bocconi
University, Warwick Business School, and the New Economic School. Financial support from the Federal Deposit
Insurance Corporation (FDIC) is gratefully acknowledged. Giannetti also acknowledges financial support from the
Jan Wallander and Tom Hedelius Foundation, the Bank of Sweden Tercentenary Foundation, and the Swedish
National Research Council.
Stockholm School of Economics, CEPR and ECGI, PO Box 6501, Sveavagen 65, SE 11383 Stockholm, Sweden.
Email: Mariassunta.Giannetti@hhs.se
Eli Broad Graduate School of Management, Michigan State University and CEPR, 315 Eppley Center, East
Lansing, MI 48824, USA. E-mail: simonov@bus.msu.edu
Mariassunta Giannetti Andrei Simonov
September 2011
Abstract. Exploiting the Japanese banking crisis of the 1990s as a laboratory, we investigate the
effects of bank bailouts on the supply of credit and on the valuations and the real performance of
banks’ clients. Consistent with recent theories, our findings indicate that the size of the capital
injections relative to the banks’ initial financial conditions is crucial for the success of bank
bailouts. Capital injections that are sufficiently large to reestablish bank capital requirements
increase the supply of credit and spur investment. In contrast, not only do capital injections that
are too small fail to increase the supply of credit, but they also encourage the evergreening of
non-performing loans and favor investment by unviable “zombie” firms.
Keywords: Recapitalization; merger; banking crisis
JEL Classifications: G21; G34
Acknowledgements. We are grateful to two anonymous referees, Steven Davis (the editor), Arnoud Boot, Kathy
Dewenter, Doug Diamond, Alexander Dyck, George Kaufman, Hong Liu, Randall Morck, Joe Peek, Kasper
Roszbach, Eric Rosengren, Philipp Schnabl, Yishay Yafeh, and conference and seminar participants at the NBER
Summer Institute Project on Market Institutions and Financial Market Risk meeting, Western Finance Association,
the Fifth New York Fed/NYU Stern Conference on Financial Intermediation, the American Economic Association,
the European Finance Association, the Paris Spring Corporate Finance Conference, the Bank of Italy/CEPR
Conference on Money, Credit and Finance, the Bank of Finland/CEPR Conference on the Credit Crunch, the
University of Frankfurt Conference on the Law and Economics of Money and Finance in Times of Financial Crisis,
the Finlawmetrics Conference at Bocconi University, HKUST, the University of Hong Kong, the University of
Zurich, the University of Lugano, the University of Durham, the Stockholm School of Economics, Bocconi
University, Warwick Business School, and the New Economic School. Financial support from the Federal Deposit
Insurance Corporation (FDIC) is gratefully acknowledged. Giannetti also acknowledges financial support from the
Jan Wallander and Tom Hedelius Foundation, the Bank of Sweden Tercentenary Foundation, and the Swedish
National Research Council.
Stockholm School of Economics, CEPR and ECGI, PO Box 6501, Sveavagen 65, SE 11383 Stockholm, Sweden.
Email: Mariassunta.Giannetti@hhs.se
Eli Broad Graduate School of Management, Michigan State University and CEPR, 315 Eppley Center, East
Lansing, MI 48824, USA. E-mail: simonov@bus.msu.edu