Beccalli, Elena, Frantz, Pascal and Lenoci, Francesca (2018) Hidden effects of bank recapitalizations. Journal of Banking and Finance, 94. pp. 297-314. ISSN 0378-4266
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Abstract
Given the importance of capital regulation in the banking industry, how and why a bank's behavior reacts to a recapitalization has profound consequences. To this end, we investigate the effects of 306 seasoned equity offerings (SEOs) conducted by listed European banks between 2002 and 2014. We use propensity score matching and find that SEOs lead to asset expansion as opposed to any deleveraging. Further, we find a decrease in lending in the short-term followed by a subsequent increase, a reduction in profitability, and an increase in systemic risk. Regulators might not have fully considered this last negative externality when they imposed the tougher Basel III capital requirements. The effects of SEOs strongly depend on the reasons behind the recapitalizations.
| Item Type: | Article |
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| Official URL: | https://www.sciencedirect.com/journal/journal-of-b... |
| Additional Information: | © 2018 Elsevier B.V. |
| Divisions: | Accounting |
| Subjects: | H Social Sciences > HF Commerce > HF5601 Accounting H Social Sciences > HG Finance |
| JEL classification: | G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance |
| Date Deposited: | 16 Jul 2018 11:47 |
| Last Modified: | 18 Apr 2024 17:30 |
| URI: | http://eprints.lse.ac.uk/id/eprint/89252 |
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