IDEAS home Printed from https://ideas.repec.org/p/run/wpaper/2020-002.html
   My bibliography  Save this paper

The Real Effects of Banks Nationalization – Evidence from the UK

Author

Listed:
  • Mariana Spatareanu
  • Vlad Manole
  • Ali Kabiri

Abstract

How did the nationalization of UK operating banks as a result of the 2008 banking crisis impact their client firms’ performance? We use unique firm-bank data and a propensity score matching technique and find that firms that borrowed from nationalized banks show a slight decrease in the growth of investment and innovation relative to firms that borrowed from nonnationalized banks. Interestingly, we find that firms that borrowed from nationalized banks slightly increase employment, short-term debt and cash holdings. Overall, these firms were able to maintain performance as a result of the policy intervention.

Suggested Citation

  • Mariana Spatareanu & Vlad Manole & Ali Kabiri, 2020. "The Real Effects of Banks Nationalization – Evidence from the UK," Working Papers Rutgers University, Newark 2020-002, Department of Economics, Rutgers University, Newark.
    • Handle: RePEc:run:wpaper:2020-002
    as

    Download full text from publisher

    File URL: https://sasn.rutgers.edu/sites/default/files/sites/default/files/inline-files/The%20Real%20Effects%20of%20Banks_WPRutgers_SpatareanuManole.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lammertjan Dam & Michael Koetter, 2012. "Bank Bailouts and Moral Hazard: Evidence from Germany," The Review of Financial Studies, Society for Financial Studies, vol. 25(8), pages 2343-2380.
    2. Liu, Wei & Kolari, James W. & Kyle Tippens, T. & Fraser, Donald R., 2013. "Did capital infusions enhance bank recovery from the great recession?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5048-5061.
    3. repec:fth:harver:1473 is not listed on IDEAS
    4. David Reeb & Mariko Sakakibara & Ishtiaq P Mahmood, 2012. "From the Editors: Endogeneity in international business research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(3), pages 211-218, April.
    5. Eichengreen, Barry & Mody, Ashoka & Nedeljkovic, Milan & Sarno, Lucio, 2012. "How the Subprime Crisis went global: Evidence from bank credit default swap spreads," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1299-1318.
    6. Hamid Mehran, 2011. "Bank Capital and Value in the Cross-Section," The Review of Financial Studies, Society for Financial Studies, vol. 24(4), pages 1019-1067.
    7. Hakenes, Hendrik & Schnabel, Isabel, 2010. "Banks without parachutes: Competitive effects of government bail-out policies," Journal of Financial Stability, Elsevier, vol. 6(3), pages 156-168, September.
    8. Brei, Michael & Schclarek, Alfredo, 2015. "A theoretical model of bank lending: Does ownership matter in times of crisis?," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 298-307.
    9. Iannotta, Giuliano & Nocera, Giacomo & Sironi, Andrea, 2013. "The impact of government ownership on bank risk," Journal of Financial Intermediation, Elsevier, vol. 22(2), pages 152-176.
    10. Brei, Michael & Schclarek, Alfredo, 2013. "Public bank lending in times of crisis," Journal of Financial Stability, Elsevier, vol. 9(4), pages 820-830.
    11. Black, Lamont K. & Hazelwood, Lieu N., 2013. "The effect of TARP on bank risk-taking," Journal of Financial Stability, Elsevier, vol. 9(4), pages 790-803.
    12. Ben S. Bernanke, 2018. "The Real Effects of Disrupted Credit: Evidence from the Global Financial Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 49(2 (Fall)), pages 251-342.
    Full references (including those not matched with items on IDEAS)

    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. Spatareanu, Mariana & Manole, Vlad & Kabiri, Ali, 2022. "The real effects of banks nationalization–evidence from the UK," LSE Research Online Documents on Economics 114478, London School of Economics and Political Science, LSE Library.
    2. Denis Davydov, 2018. "Does State Ownership of Banks Matter?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(2), pages 250-285, August.
    3. Carbó-Valverde, Santiago & Cuadros-Solas, Pedro J. & Rodríguez-Fernández, Francisco, 2020. "Do bank bailouts have an impact on the underwriting business?," Journal of Financial Stability, Elsevier, vol. 49(C).
    4. Calabrese, Raffaella & Degl’Innocenti, Marta & Osmetti, Silvia Angela, 2017. "The effectiveness of TARP-CPP on the US banking industry: A new copula-based approach," European Journal of Operational Research, Elsevier, vol. 256(3), pages 1029-1037.
    5. Allen N. Berger & Raluca Roman, 2015. "Did saving Wall Street really save Main Street : the real effects of TARP on local economic conditions," Research Working Paper RWP 15-13, Federal Reserve Bank of Kansas City.
    6. Allen N. Berger & Tanakorn Makaew & Raluca Roman, 2015. "Did bank borrowers benefit from the TARP program : the effects of TARP on loan contract terms," Research Working Paper RWP 15-11, Federal Reserve Bank of Kansas City.
    7. Allen N. Berger & Raluca Roman & John Sedunov, 2016. "Do bank bailouts reduce or increase systemic risk? the effects of TARP on financial system stability," Research Working Paper RWP 16-8, Federal Reserve Bank of Kansas City.
    8. Michael Koetter & Felix Noth, 2016. "Did Tarp Distort Competition Among Sound Unsupported Banks?," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 994-1020, April.
    9. D’Orazio, Paola & Valente, Marco, 2019. "The role of finance in environmental innovation diffusion: An evolutionary modeling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 417-439.
    10. Diepstraten, Maaike & van der Cruijsen, Carin, 2019. "To stay or go? Consumer bank switching behaviour after government interventions," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 16-33.
    11. Léon, Florian, 2023. "Public bank lending in Africa in times of crisis," Emerging Markets Review, Elsevier, vol. 55(C).
    12. Janbaz, Mehdi & Hassan, M. Kabir & Floreani, Josanco & Dreassi, Alberto & Jiménez, Alfredo, 2022. "Political risk in banks: A review and agenda," Research in International Business and Finance, Elsevier, vol. 62(C).
    13. Cuadros-Solas, Pedro J. & Salvador, Carlos & Suárez, Nuria, 2021. "Am I riskier if I rescue my banks? Beyond the effects of bailouts," Journal of Financial Stability, Elsevier, vol. 56(C).
    14. Sedunov, John, 2021. "Federal reserve intervention and systemic risk during financial crises," Journal of Banking & Finance, Elsevier, vol. 133(C).
    15. Diepstraten, Maaike & van der Cruijsen, Carin, 2019. "To stay or go? Consumer bank switching behaviour after government interventions," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 16-33.
    16. Srivastav, Abhishek & Armitage, Seth & Hagendorff, Jens, 2014. "CEO inside debt holdings and risk-shifting: Evidence from bank payout policies," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 41-53.
    17. Koetter, Michael & Noth, Felix, 2015. "Bank bailouts and competition - Did TARP distort competition among sound banks?," Working Paper Series 1804, European Central Bank.
    18. repec:ecb:ecbwps:20141804 is not listed on IDEAS
    19. Hryckiewicz, Aneta, 2014. "What do we know about the impact of government interventions in the banking sector? An assessment of various bailout programs on bank behavior," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 246-265.
    20. Lamont K. Black & Ioannis Floros & Rajdeep Sengupta, 2016. "Raising capital when the going gets tough: U.S. bank equity issuance from 2001 to 2014," Research Working Paper RWP 16-5, Federal Reserve Bank of Kansas City.
    21. Ignatowski, Magdalena & Korte, Josef, 2014. "Wishful thinking or effective threat? Tightening bank resolution regimes and bank risk-taking," Journal of Financial Stability, Elsevier, vol. 15(C), pages 264-281.

    More about this item

    Keywords

    firm performance; bank nationalization; financial crisis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

    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:run:wpaper:2020-002. 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: Maria Rosales-Rueda (email available below). General contact details of provider: https://edirc.repec.org/data/edrutus.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.