This paper estimates the systematic risk of the debt in public leveraged recapitalizations. We calculate this risk as a function of the difference in systematic equity risk before and after the recapitalization. The increase in equity risk is surprisingly small after a recapitalization, ranging from 37% to 57%, depending on the estimation method. If total company risk is unchanged, the implied ...

In order to protect the public's confidence in deposit money, governments usually guarantee bank deposits implicitly or through an explicit deposit insurance system. Thus bank insolvency does not induce immediate bank runs. In many episodes of banking crises, several years passed quietly after bank insolvency had occurred, with the insolvency continuing to develop under the surface, and the ras...

During some recent financial crises, the majority of domestic banks or indeed the entire banking sector became insolvent. We have analyzed the welfare effects of policy responses to bank insolvency by examining a modified version of the Diamond-Rajan model, introducing a fiat currency. The sources of inefficiency in our model are the ”moral hazard in banking” and the “premature liquidation of b...

We analyze government interventions to recapitalize a banking sector that restricts lending to firms because of debt overhang. We find that the efficient recapitalization program injects capital against preferred stock plus warrants and conditions implementation on sufficient bank participation. Preferred stock plus warrants reduces opportunistic participation by banks that do not require recap...

The behavior of the reserve insurance firms in Nigeria from 1996 to 2011 is investigated using ruin model with economic environment. investment portfolios are classified according types returns expected: Investments fixed and investments stochastic returns. Against usual ways monitoring performances companies regression correlation, a risk environment used. probability determined integro-differ...