IDEAS home Printed from https://ideas.repec.org/a/bla/coecpo/v19y2001i1p49-58.html
   My bibliography  Save this article

Assessing Damages: The 1983 Israeli Bank Shares Crisis

Author

Listed:
  • AA Blass
  • RS Grossman

Abstract

In 1983, Israeli bank shares collapsed following several years during which the banks had actively intervened to promote share prices and thereby contributed to a 300% rise in real terms. During the crisis the government assumed control of the banks, which they did not begin to sell back to the public until 1993. We compare 1993 bank share prices after the banks were partially relisted on the Stock Exchange with 1983 precrisis values. The 1993 time‐adjusted market values were $10 billion lower than in 1983, a decline borne by precrisis shareholders ($4 billion) and by taxpayers ($6 billion). Of this latter amount, two‐thirds represents a transfer from the government to shareholders, while approximately one‐third represents an efficiency loss ‐ and hence a direct cost ‐ resulting from government ownership of the banks for 10 years following the crisis. The results highlight the risk inherent in a banking system that is both concentrated and universal and illustrates the costs associated with sustained government ownership.

Suggested Citation

  • AA Blass & RS Grossman, 2001. "Assessing Damages: The 1983 Israeli Bank Shares Crisis," Contemporary Economic Policy, Western Economic Association International, vol. 19(1), pages 49-58, January.
    • Handle: RePEc:bla:coecpo:v:19:y:2001:i:1:p:49-58
    DOI: 10.1111/j.1465-7287.2001.tb00049.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1465-7287.2001.tb00049.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1465-7287.2001.tb00049.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 2008. "Why Is Rent-Seeking So Costly to Growth?," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 213-218, Springer.
    2. King, Mervyn, 1994. "Debt deflation: Theory and evidence," European Economic Review, Elsevier, vol. 38(3-4), pages 419-445, April.
    3. Grossman Richard S., 1993. "The Macroeconomic Consequences of Bank Failures under the National Banking System," Explorations in Economic History, Elsevier, vol. 30(3), pages 294-320, July.
    4. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    5. Blass, Asher A. & Grossman, Richard S., 1996. "Financial fraud and banking stability: The Israeli bank crisis of 1983 and trial of 1990," International Review of Law and Economics, Elsevier, vol. 16(4), pages 461-472, December.
    6. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard S.Grossman, 2016. "Banking Crises," Wesleyan Economics Working Papers 2016-001, Wesleyan University, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asher A. Blass & Richard S. Grossman, 1996. "A Harmful Guarantee? The 1983 Israel Bank Shares Crisis Revisited," Bank of Israel Working Papers 1996.03, Bank of Israel.
    2. David Meerschwam, 1991. "The Japanese Financial System and the Cost of Capital," NBER Chapters, in: Trade with Japan: Has the Door Opened Wider?, pages 191-224, National Bureau of Economic Research, Inc.
    3. Charles Goodhart & Boris Hofmann, 2003. "Deflation, Credit and Asset Prices," Working Papers 132003, Hong Kong Institute for Monetary Research.
    4. Adrien Auclert, 2019. "Monetary Policy and the Redistribution Channel," American Economic Review, American Economic Association, vol. 109(6), pages 2333-2367, June.
    5. Arthur J. Rolnick, 1993. "Market disciplines as a regulator of bank risk," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 37, pages 96-110.
    6. Gerald P. Dwyer & R. Alton Gilbert, 1989. "Bank runs and private remedies," Review, Federal Reserve Bank of St. Louis, issue May, pages 43-61.
    7. Barry Eichengreen & Andrew K. Rose, 1998. "Staying Afloat When the Wind Shifts: External Factors and Emerging-Market Banking Crises," NBER Working Papers 6370, National Bureau of Economic Research, Inc.
    8. SAU, Lino, 2001. "Stato del Credito, Effetto Cash-flow ed Instabilità [State of Credit, Cash-flow Effect and Instability]," MPRA Paper 3641, University Library of Munich, Germany.
    9. Gregor W. Smith, 2006. "The spectre of deflation: a review of empirical evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 39(4), pages 1041-1072, November.
    10. Hali Edison & Pongsak Luangaram & Marcus Miller, 1998. "Asset Bubbles, Domino Effects and 'Lifeboats': Elements of the East Asian Crisis," CSGR Working papers series 05/98, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
    11. Jaakko Kiander & Pentti Vartia, 1996. "The great depression of the 1990s in Finland," Finnish Economic Papers, Finnish Economic Association, vol. 9(1), pages 72-88, Spring.
    12. Carlos D. Ramirez & Philip A. Shively, 2012. "The Effect of Bank Failures on Economic Activity: Evidence from U.S. States in the Early 20th Century," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 433-455, March.
    13. Ling Chu & Robert Mathieu & Chima Mbagwu, 2009. "The Impact of Corporate Governance and Audit Quality on the Cost of Private Loans," Accounting Perspectives, John Wiley & Sons, vol. 8(4), pages 277-304, November.
    14. Bhamra, Harjoat S. & Fisher, Adlai J. & Kuehn, Lars-Alexander, 2011. "Monetary policy and corporate default," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 480-494.
    15. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2011. "When credit bites back: leverage, business cycles, and crises," Working Paper Series 2011-27, Federal Reserve Bank of San Francisco.
    16. Grossman, Richard, 2016. "Banking Crises," CEPR Discussion Papers 11268, C.E.P.R. Discussion Papers.
    17. Dimand, Robert W. & Koehn, Robert H., 2008. "Central Bankers in the Minsky Moment: How Different Central Banks Have Responded to the Threat of Debt-Deflation," The Journal of Economic Asymmetries, Elsevier, vol. 5(1), pages 139-148.
    18. Goetz von Peter, 2005. "Debt-Deflation: Concepts, and a Stylised Model," Macroeconomics 0505001, University Library of Munich, Germany.
    19. John Kandrac, 2014. "Bank Failure, Relationship Lending, and Local Economic Performance," Finance and Economics Discussion Series 2014-41, Board of Governors of the Federal Reserve System (U.S.).
    20. Kupiec, Paul H. & Ramirez, Carlos D., 2013. "Bank failures and the cost of systemic risk: Evidence from 1900 to 1930," Journal of Financial Intermediation, Elsevier, vol. 22(3), pages 285-307.

    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:coecpo:v:19:y:2001:i:1:p:49-58. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/weaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.