Do Business Borrowers Benefit from Bank Bailouts?: The Effects of TARP on Loan Contract Terms

摘要

We investigate benefits to business borrowers from bank bailouts, specifically the Troubled Asset Relief Program (TARP). Applying difference-in-difference methodology to loan-level data, we find more favorable borrower contract terms in five dimensions, spread, amount, maturity, collateral, and covenants, suggesting increased credit supply at the intensive margin by bailed-out banks. Findings are robust to dealing with endogeneity and other issues. Riskier borrowers benefit more, consistent with moral hazard exploitation. Small and unlisted borrowers benefit less, suggesting fewer benefits for financially constrained firms. Benefits accrue to both relationship and nonrelationship borrowers. Results contribute to the research and policy debates on bank bailouts.