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
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: Suggested Citation