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 propen- sity 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 prof- itability, 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.

Beccalli, E., Frantz, P. R., Lenoci, F., Hidden effects of bank recapitalizations, <<JOURNAL OF BANKING & FINANCE>>, 2018; 2018 (92): 297-314. [doi:10.1016/j.jbankfin.2018.07.001] [http://hdl.handle.net/10807/125281]

Hidden effects of bank recapitalizations

Beccalli, Elena
;
Frantz, Pascal Rene';
2018

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 propen- sity 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 prof- itability, 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.
2018
Inglese
Beccalli, E., Frantz, P. R., Lenoci, F., Hidden effects of bank recapitalizations, <<JOURNAL OF BANKING & FINANCE>>, 2018; 2018 (92): 297-314. [doi:10.1016/j.jbankfin.2018.07.001] [http://hdl.handle.net/10807/125281]
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/125281
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 9
  • ???jsp.display-item.citation.isi??? 9
social impact