The Real Effects of Government Intervention: Firm-Level Evidence from TARP

2019 American Economic Association Conference

54 Pages Posted: 12 Dec 2015 Last revised: 25 Jun 2021

See all articles by Jinfei Sheng

Jinfei Sheng

University of California, Irvine - Paul Merage School of Business

Date Written: June 25, 2021

Abstract

This paper investigates the real and financial effects of the largest government intervention in US history, the Troubled Asset Relief Program (TARP), on individual firms. Firms borrowing from banks that participate in TARP increase long-term debt and have more cash holdings and working capital after the Program compared to firms borrowing from banks that do not participate in TARP. But, there is no significant impact of TARP on corporate investment, employment, or R&D. We conclude that TARP exerts significant influence on firms’ liquidity and financial decisions, yet its impact on firms’ real activities is limited.

Keywords: government intervention, TARP, real effects, real activities

JEL Classification: E44, G21, G28, G32

Suggested Citation

Sheng, Jinfei, The Real Effects of Government Intervention: Firm-Level Evidence from TARP (June 25, 2021). 2019 American Economic Association Conference , Available at SSRN: https://ssrn.com/abstract=2702672 or http://dx.doi.org/10.2139/ssrn.2702672

Jinfei Sheng (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

4291 Pereira Drive
Irvine, CA 92697
United States

HOME PAGE: http://sites.google.com/site/shengjinfei/

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