Bachelor of Arts
Barbara Craig, Chair
TARP, Troubled Asset Relief Program, Banks, Valuation, Price to tangible book, Market to book
This paper examines to what extent banks with outstanding Troubled Asset Relief Program (TARP) debt are perceived as potential takeover targets. Each bank's price-to-tangible-book value is related to a series of fundamental bank ratios and market index as well as a series of TARP variables that capture if a bank took TARP and for how long. The results show that middle tiered banks (with assets between 500 million and 5 billion) are positively associated with retaining TARP, which may suggest they are perceived as takeover targets. In addition, banks with higher valuations have lower non-performing assets, net charge offs, loan loss reserves, tier 1 capital ratios, real estate and development loans. A higher price-to-tangible-book value is also associated with higher returns on average tangible common equity and interest income.
Garcia, Oscar, "TARP: Indication of a Potential Target? Evaluating Market to Book Ratios and Their Relationship to TARP" (2013). Honors Papers. 322.