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Journal Article

On the Real Effects of Bank Bailouts: Micro Evidence from Japan

Mariassunta Giannetti and Andrei Simonov
American Economic Journal: Macroeconomics
Vol. 5, No. 1 (January 2013), pp. 135-167
Stable URL: http://www.jstor.org/stable/43189933
Page Count: 33
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On the Real Effects of Bank Bailouts: Micro Evidence from Japan
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Abstract

Exploiting the Japanese banking crisis of the 1990s as a laboratory, we investigate the effects of bank bailouts on the supply of credit and the performance of banks' clients. Our findings indicate that the size of capital injections relative to the initial financial condition of banks is crucial for the success of bank bailouts. Capital injections that are large enough to reestablish bank capital requirements increase the supply of credit and spur investment. In contrast, not only do capital injections that are too small fail to increase the supply of credit, but they also encourage the evergreening of nonperforming loans.

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