Private Equity and Financial Stability: Evidence from Failed Bank Resolution in the Crisis / Emily Johnston-Ross, Song Ma, Manju Puri.

Format:

Book

Author/Creator:

Johnston-Ross, Emily.

Contributor:

National Bureau of Economic Research.

Ma, Song.

Puri, Manju.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28751.

NBER working paper series no. w28751

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

This paper investigates the role of private equity (PE) in failed bank resolutions after the 2008 financial crisis, using proprietary FDIC failed bank acquisition data. PE investors made substantial investments in underperforming and riskier failed banks, particularly in geographies where local banks were also distressed, filling the gap created by a weak, undercapitalized banking sector. Using a quasi-random empirical design based on detailed bidding information, we show PE-acquired banks performed better ex post, with positive real effects for the local economy. Overall, PE investors had a positive role in stabilizing the financial system through their involvement in failed bank resolution.

Notes:

Print version record

May 2021.