Working Paper: CEPR ID: DP2453
Authors: Jenny Corbett; Janet Mitchell
Abstract: This paper focuses on bank rescue packages and on the behaviour of troubled banks in light of rescue offers. A puzzling feature of experience with banking crises is that in many cases policy authorities make offers of bank rescue, and banks are reluctant to accept these offers. We study situations in which regulators have decided to offer bank rescue plans, and we show that a combination of factors, including bankers' reputational concerns, can explain banks' potential reluctance to accept offers of recapitalization.
Keywords: banking crises; banking regulation; financial reform
JEL Codes: G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bankers' reputational concerns (G21) | reluctance to accept rescue offers (H84) |
| severity of the crisis (H12) | reluctance to accept rescue offers (H84) |
| quality of banking supervision (G28) | reluctance to accept rescue offers (H84) |
| Bankers' reputational concerns (G21) | quality of banking supervision (G28) |
| reluctance to accept rescue offers (H84) | worsening financial state (F65) |
| severity of the crisis (H12) | worsening financial state (F65) |
| quality of banking supervision (G28) | worsening financial state (F65) |