Abstract
We empirically examine the Capital Purchase Program (CPP) used by the U.S. government to bail out distressed banks and its implications for regulatory policy. We find strong evidence that a feature of the CPP—the government's ability to appoint independent directors on the board of an assisted bank that missed six dividend payments to Treasury—had a significant effect on bank behavior. Banks were averse to these appointments—the empirical distribution of missed payments exhibits a sharp discontinuity at five. Director appointments by Treasury were associated with improved bank performance and lower CEO pay.
Original language | English |
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Pages (from-to) | 415-462 |
Journal | American Economic Journal-Economic Policy |
Volume | 16 |
Issue number | 4 |
DOIs | |
Publication status | Published - Nov 2024 |
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Dive into the research topics of 'The carrot and the stick: Bank bailouts and the disciplining role of board appointments'. Together they form a unique fingerprint.Datasets
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Data and Code for: The Carrot and the Stick: Bank Bailouts and the Disciplining Role of Board Appointments
Mücke, C. (Creator), Pelizzon, L. (Creator), Pezone, V. (Creator) & Thakor, A. (Creator), openICPSR, 30 Sept 2024
DOI: 10.3886/E195481V1, https://www.openicpsr.org/openicpsr/project/195481/version/V1/view
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