Divisional Managers And Internal Capital Markets

The authors investigate the determinants of capital allocation to financial institutions under the Troubled Asset Relief Program (TARP). It's found that banks' political ties played a significant role in TARP fund distribution. Connections to Congressmen on finance committees and representation at the Federal Reserve via board members are positively related to banks' likelihood of receiving TARP capital. The TARP investment amounts are positively related to banks' political contributions and lobbying expenditures. The effect of political influence is stronger for underperforming banks, thus shifting capital toward weaker institutions.

Provided by: University of Michigan (Ross) Topic: Big Data Date Added: Oct 2010 Format: PDF

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