{"title":"Piercing through the haze: Did PPP increase versus decrease bank efficiency?","authors":"Allen N. Berger, Cristina Ortega, Raluca A. Roman","doi":"10.1111/fmii.12206","DOIUrl":null,"url":null,"abstract":"<p>We study profit and cost efficiency effects of the Paycheck Protection Program (PPP) for US banks that disbursed the funds. Using bank-level data combined with PPP bailout data and instrumental variables and other techniques for identification, our findings suggest that more intense PPP lending boosted bank profit efficiency but decreased cost efficiency. We uncover channels for profit efficiency improvements through higher revenues from core deposits and lending, and a labour-related channel for the decline in bank cost efficiency from hiring more employees and significantly increasing compensation expenses. Findings are robust to many checks and may have important implications for bank management and future government bailout policy design.</p>","PeriodicalId":39670,"journal":{"name":"Financial Markets, Institutions and Instruments","volume":"33 5","pages":"479-514"},"PeriodicalIF":0.0000,"publicationDate":"2024-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Financial Markets, Institutions and Instruments","FirstCategoryId":"1085","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/fmii.12206","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"Economics, Econometrics and Finance","Score":null,"Total":0}
引用次数: 0
Abstract
We study profit and cost efficiency effects of the Paycheck Protection Program (PPP) for US banks that disbursed the funds. Using bank-level data combined with PPP bailout data and instrumental variables and other techniques for identification, our findings suggest that more intense PPP lending boosted bank profit efficiency but decreased cost efficiency. We uncover channels for profit efficiency improvements through higher revenues from core deposits and lending, and a labour-related channel for the decline in bank cost efficiency from hiring more employees and significantly increasing compensation expenses. Findings are robust to many checks and may have important implications for bank management and future government bailout policy design.
期刊介绍：
Financial Markets, Institutions and Instruments bridges the gap between the academic and professional finance communities. With contributions from leading academics, as well as practitioners from organizations such as the SEC and the Federal Reserve, the journal is equally relevant to both groups. Each issue is devoted to a single topic, which is examined in depth, and a special fifth issue is published annually highlighting the most significant developments in money and banking, derivative securities, corporate finance, and fixed-income securities.
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