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Bank bailouts: lessons to learn when patience is a virtue

Bank bailouts: lessons to learn when patience is a virtue Purpose – Most recent bank bailouts, from a financial and economic perspective, turn political. This paper seeks to frame ten effective implications/lessons of the most recent bank bailouts of 2007‐2009 in the Western economy model when analyzing actual shareholders' value retrenchment or growth opportunities. Design/methodology/approach – The paper uses a literature review and a re‐conceptualized framework of event study methodology, secondary data analysis of qualitative and quantitative information. Findings – Recent bank bailouts relate to: global bailout interconnections, economic downturn and liquidity boost, abnormal returns, efficiency recovery, evasion of social costs, new opportunities for M&A, new risk management applications, opportunistic investors and eventually patience. Most important, findings recommend shareholders to grasp opportunities for bargains from bailout banks as well as to harvest their existing investments. At the same time, economic education and control become another important solution. Research limitations/implications – Consequently, as the paper targets most recent bailouts, a still ongoing event, there is a need for extended financial data that could enhance some cause‐related solutions after economic recovery. Practical implications – The practicality of the paper refers to guiding management of both government and financial institutions on the choice for reasoning bank bailouts, providing some critical thinking views to investors as well as academics. Originality/value – Research or studies on the most recent financial crises bailouts have not yet been written, due to the process continuation. The novelty of the paper resides not in calculating ratios and interpreting them, but rather in looking more into some interesting strategic moves used to boost shareholders' value. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png EuroMed Journal of Business Emerald Publishing

Bank bailouts: lessons to learn when patience is a virtue

EuroMed Journal of Business , Volume 6 (2): 14 – Jul 18, 2011

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1450-2194
DOI
10.1108/14502191111151269
Publisher site
See Article on Publisher Site

Abstract

Purpose – Most recent bank bailouts, from a financial and economic perspective, turn political. This paper seeks to frame ten effective implications/lessons of the most recent bank bailouts of 2007‐2009 in the Western economy model when analyzing actual shareholders' value retrenchment or growth opportunities. Design/methodology/approach – The paper uses a literature review and a re‐conceptualized framework of event study methodology, secondary data analysis of qualitative and quantitative information. Findings – Recent bank bailouts relate to: global bailout interconnections, economic downturn and liquidity boost, abnormal returns, efficiency recovery, evasion of social costs, new opportunities for M&A, new risk management applications, opportunistic investors and eventually patience. Most important, findings recommend shareholders to grasp opportunities for bargains from bailout banks as well as to harvest their existing investments. At the same time, economic education and control become another important solution. Research limitations/implications – Consequently, as the paper targets most recent bailouts, a still ongoing event, there is a need for extended financial data that could enhance some cause‐related solutions after economic recovery. Practical implications – The practicality of the paper refers to guiding management of both government and financial institutions on the choice for reasoning bank bailouts, providing some critical thinking views to investors as well as academics. Originality/value – Research or studies on the most recent financial crises bailouts have not yet been written, due to the process continuation. The novelty of the paper resides not in calculating ratios and interpreting them, but rather in looking more into some interesting strategic moves used to boost shareholders' value.

Journal

EuroMed Journal of BusinessEmerald Publishing

Published: Jul 18, 2011

Keywords: Shareholders; Asset valuation; Bank bailout; Bank consolidation; M&As; Financial crisis; Social corporate responsibility; Financial risk; Financial management

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