crawford school of public policyinjection number marks preferred stock subordinated bonds / loans...

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𝑅𝐵𝐶 𝑟𝑎𝑡𝑖𝑜 =𝑇𝑖𝑒𝑟 𝐼 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 + 𝑇𝑖𝑒𝑟 𝐼𝐼 𝑐𝑎𝑝𝑖𝑡𝑎𝑙

𝑅𝑖𝑠𝑘 𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 (i)

∆ 𝑙𝑜𝑔(𝐿𝑖,𝑡+1) = 𝛼0 + 𝛼1∆ 𝑙𝑜𝑔(𝐿𝑖,𝑡) + 𝛽1𝐶𝑎𝑝𝑖,𝑡 + 𝛾1(𝑟𝑡𝐿 − 𝑟𝑡

+ 𝛾2∆ 𝑙𝑜𝑔(𝐺𝐷𝑃𝑡+1) + 휀𝑖,𝑡+1

∆ 𝑙𝑜𝑔(𝐿𝑖,𝑡)

𝐶𝑎𝑝𝑖,𝑡

𝑟𝑡𝐿 − 𝑟𝑡

εi,t+1

[휀𝑖,𝑡+1|𝐼𝑡] =

𝐷) + 𝛾2∆ 𝑙𝑜𝑔(𝐺𝐷𝑃𝑡+1)

+𝛽2𝐶𝑎𝑝𝑖,𝑡 ∙ 𝐼𝑛𝑗𝐷𝑖,𝑡+1 + 𝛿1𝐼𝑛𝑗𝐷𝑖,𝑡+1 + 휀𝑖,𝑡+1 (1)

𝐼𝑛𝑗𝐷𝑖,𝑡+1 𝐼𝑛𝑗𝐷𝑖,𝑡+1 = 1

𝐼𝑛𝑗𝐷𝑖,𝑡+1 = 0

𝛽2 and 𝛿1

𝛽1 𝛽1

+𝛽3𝐶𝑎𝑝𝑖,𝑡 ∙ 𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1 + 𝛿2𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1 + 𝛽4𝐶𝑎𝑝𝑖,𝑡 ∙ 𝐸𝑎𝑟𝑙𝑦𝐷𝑖,𝑡+1 + 𝛿3𝐸𝑎𝑟𝑙𝑦𝐷𝑖,𝑡+1

+ 휀𝑖,𝑡+1 (2)

𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1＝1

𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1＝0. 𝐸𝑎𝑟𝑙𝑦𝐷𝑖,𝑡+1＝1

𝛽3, 𝛿2, 𝛽4 and 𝛿3

+𝛾3∆ 𝑙𝑜𝑔(𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑖,𝑡+1) + 𝛽2𝐶𝑎𝑝𝑖,𝑡 ∙ 𝐼𝑛𝑗𝐷𝑖,𝑡+1 + 𝛿1𝐼𝑛𝑗𝐷𝑖,𝑡+1 + 휀𝑖,𝑡+1 (3)

+ 𝛾3∆ 𝑙𝑜𝑔(𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑖,𝑡+1) + 𝛽3𝐶𝑎𝑝𝑖,𝑡 ∙ 𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1 + 𝛿2𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1

+𝛽4𝐶𝑎𝑝𝑖,𝑡 ∙ 𝐸𝑎𝑟𝑙𝑦𝐷𝑖,𝑡+1 + 𝛿3𝐸𝑎𝑟𝑙𝑦𝐷𝑖,𝑡+1 + 휀𝑖,𝑡+1 (4)

∆ 𝑙𝑜𝑔(𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑖,𝑡+1)

380000

400000

420000

440000

460000

480000

500000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Billion Yen

Year (Source: Bank of Japan)

1990Q1 91Q1 92Q1 93Q1 94Q1 95Q1 96Q1 97Q1 98Q1 99Q1 2000Q1 01Q1 02Q1 03Q1 04Q1 05Q1 06Q1 07Q1

All Enterprises Small Enterprises(Source: Bank of Japan)

Quartely

○ ●

Injection Number Marks

Preferred Stock Subordinated Bonds / Loans Periods of Banks on Table 2

Finacial Function 321 1494.6 Mar. 1998

Stabilizatioin Law (17.68%) (82.32%)

Early Strengthening 7281.3 1324 Mar. 1999

Law (84.61%) (15.39%) - Mar. 2002

1815.6

8605.3

Law Name Total Amount*billion yen

21 ○

Bank name FY1997 FY1998 FY1999 FY2000 FY2001 Current name (in 2009)

Daiichi Kangyo ○ ●

Fuji ○ ●

Industrial Bank of Japan ○ ●

Yasuda Trust ○

Sakura ○ ●

Sumitomo ○ ●

Tokyo Mitsubishi ○

Mitsubishi Trust ○ ●

Tokai ○ ●

Toyo Trust ○ ●

Asahi ○ ●

Kinki Osaka ●

Sumitomo Trust ○ ●

Mitsui Trust ○ ●

Chuo Trust ○ ●

Yokohama ○ ●

Hokuriku ○ ●

Hokkaido ●

Ashikaga ○ ● Ashigin

Shinsei ○ ●

Aozora ○ ●

Ryukyu ●

Hiroshima Sogo ● Momiji

Kumamoto Family ●

Chiba Kogyo ●

Yachiyo ●

Kansai Sawayaka ●

Higashi Nippon ●

Gifu ●

Fukuoka City ● Nishi Nippon City

Wakayama ●

Kyushu ● Kyushu Shinwa

Kanto Tsukuba

Mizuho

Sumitomo Mitsui

Mitsui Trust

Hokuhoku

Sanwa ○ ● Mitsubishi UFJ

Daiwa ○ ● Resona

Mean Std. Dev. Maximum Minimum

Internatioinal banks (FY 1993-2005)

∆log(Loan)_t (%) 0.549 4.041 13.604 -15.758

∆log(SME)_t (%) 0.413 4.276 14.714 -26.665

Loan-Deposit interest rate spred_t (%) 1.377 0.131 1.557 1.103

Capital ratio_t (%) 10.962 1.380 15.030 8.360

Tier1 ratio_t (%) 7.354 1.787 12.166 4.184

Domestic banks (FY 1999-2005)

∆log(Loan)_t (%) -0.021 4.308 21.939 -28.732

∆log(SME)_t (%) -0.424 7.851 32.200 -173.592

Loan-Deposit interest rate spred_t (%) 1.385 0.159 1.557 1.103

Capital ratio_t (%) 9.387 1.949 19.470 4.110

Tier1 ratio_t (%) 7.477 2.106 19.121 2.215

Equation No. (1) (2) (3) (4) (1) (2) (3) (4)

Dependent Variable : ∆log(Loan)_t+1

∆log(Loan)_t 0.023 -0.016 0.002 -0.033 -0.005 -0.048 -0.018 -0.081

(0.738) (-0.200) (0.055) (-0.428) (-0.142) (-1.205) (-0.361) (-1.161)

Loan-Deposit interest rate spred_t -11.561 *** -12.810 *** -12.015 *** -13.019 *** -8.956 *** -10.097 *** -10.448 *** -11.529 ***

(-7.155) (-2.621) (-7.512) (-4.962) (-6.566) (-4.936) (-7.625) (-7.496)

∆log(GDP)_t+1 0.535 *** 0.419 0.458 * 0.411 0.784 *** 0.480 *** 0.723 *** 0.433 ***

(2.853) (1.034) (1.906) (1.437) (5.047) (3.613) (3.789) (3.048)

∆log(Deposit)_t+1 0.101 *** 0.063 0.109 *** 0.124 ***

(3.733) (0.835) (3.583) (3.292)

Capital ratio_t 0.140 0.282 -0.153 0.127

(0.309) (0.600) (-0.358) (0.214)

Tier1 ratio_t 0.847 *** 0.615 0.872 *** 0.556

(2.752) (1.646) (2.776) (1.373)

Effects of Capital Injection

(a)Total effect of two capital injection policies

Capital ratio_t ・InjD_t+1 3.419 *** 2.851 ***

(3.974) (2.862)

Tier1 ratio_t ・InjD_t+1 5.851 *** 5.014 ***

(8.793) (6.977)

InjD_t+1 -40.373 *** -33.756 *** -38.049 *** -32.750 ***

(-4.558) (-3.223) (-9.885) (-7.597)

(b)Financial Function Stabilization Law

Capital ratio_t ・StabD_t+1 -1.478 -1.733

(-0.455) (-0.861)

Tier1 ratio_t ・StabD_t+1 2.629 * 0.832

(1.791) (0.531)

StabD_t+1 19.179 20.830 -18.013 -6.207

(0.510) (0.844) (-1.610) (-0.526)

(c)Early Strengthening Law

Capital ratio_t ・EarlyD_t+1 10.937 *** 10.305 ***

(2.882) (3.039)

Tier1 ratio_t ・EarlyD_t+1 7.611 *** 7.966 ***

(3.721) (4.096)

EarlyD_t+1 -129.333 *** -120.680 *** -48.865 *** -52.085 ***

(-2.712) (-2.783) (-2.767) (-3.036)

Obs. 133 133 133 133 133 133 133 133

Equation No. (1) (2) (3) (4) (1) (2) (3) (4)

∆log(Loan)_t 0.008 -0.076 0.013 -0.077 -0.053 -0.214 -0.060 -0.126

(0.217) (-0.399) (0.336) (-0.410) (-1.140) (-0.832) (-1.108) (-0.565)

Loan-Deposit interest rate spred_t -7.857 *** -7.203 *** -8.052 *** -7.327 ** -7.651 *** -9.096 *** -8.437 *** -9.019 ***

(-11.323) (-2.667) (-9.740) (-2.515) (-4.506) (-3.286) (-6.524) (-4.538)

∆log(GDP)_t+1 0.498 *** -0.031 0.532 ** -0.044 0.512 -0.048 0.572 0.136

(3.242) (-0.073) (2.469) (-0.092) (1.227) (-0.091) (1.519) (0.383)

∆log(Deposit)_t+1 0.088 *** 0.000 0.102 *** 0.043

(5.976) (0.000) (2.779) (0.971)

Capital ratio_t 0.388 ** 0.027 0.435 * 0.013

(2.270) (0.042) (1.972) (0.029)

Tier1 ratio_t 0.744 0.006 0.832 0.250

(1.146) (0.006) (1.449) (0.399)

(3.597) (2.811)

Tier1 ratio_t ・InjD_t+1 2.528 ** 2.301

(2.201) (1.406)

InjD_t+1 -27.622 *** -25.456 *** -12.863 * -10.896

(-3.429) (-2.747) (-1.785) (-1.126)

Capital ratio_t ・StabD_t+1 7.540 7.231

(0.827) (0.834)

Tier1 ratio_t ・StabD_t+1 -14.160 -2.494

(-0.361) (-0.124)

StabD_t+1 -86.778 -83.764 65.119 4.074

(-0.975) (-0.913) (0.327) (0.042)

Capital ratio_t ・EarlyD_t+1 -6.164 -5.857

(-0.495) (-0.435)

Tier1 ratio_t ・EarlyD_t+1 20.430 7.306

(0.474) (0.355)

EarlyD_t+1 76.550 73.397 -103.739 -30.318

(0.551) (0.476) (-0.450) (-0.295)

Obs. 131 131 131 131 131 131 131 131

*1 t-statistics in parentheses; *Significant at 10%; **significant at 5%; ***significant at 1%

*2 Method : Panel Generalized Method of Moments (Arellano and Bover [1995])

*3 The unit of ∆log(Loan), Loan-Deposit interest rate spred, Capital ratio and Tier 1 ratio is %

*4 The results reported are for the sample FY 1993-2006

On the other hand, using equation (2) and (4), we separately examine the each effects of these two laws.

In the case of using equation (1) and (3), we examine the total effect of two capital injection policies: the Financial Function Stabilization Law and the Early Strengthening Law.

Panel B Loan =SME LoansCapital Ratio Tier1 Ratio

Panel A Loan =Total LoansCapital Ratio Tier1 Ratio

Equation No. (1) (2) (3) (4) (1) (2) (3) (4)

∆log(Loan)_t 0.023 -0.016 0.002 -0.033 -0.005 -0.048 -0.018 -0.081

(0.738) (-0.200) (0.055) (-0.428) (-0.142) (-1.205) (-0.361) (-1.161)

Loan-Deposit interest rate spred_t -11.561 *** -12.810 *** -12.015 *** -13.019 *** -8.956 *** -10.097 *** -10.448 *** -11.529 ***

(-7.155) (-2.621) (-7.512) (-4.962) (-6.566) (-4.936) (-7.625) (-7.496)

∆log(GDP)_t+1 0.535 *** 0.419 0.458 * 0.411 0.784 *** 0.480 *** 0.723 *** 0.433 ***

(2.853) (1.034) (1.906) (1.437) (5.047) (3.613) (3.789) (3.048)

∆log(Deposit)_t+1 0.101 *** 0.063 0.109 *** 0.124 ***

(3.733) (0.835) (3.583) (3.292)

Capital ratio_t 0.140 0.282 -0.153 0.127

(0.309) (0.600) (-0.358) (0.214)

Tier1 ratio_t 0.847 *** 0.615 0.872 *** 0.556

(2.752) (1.646) (2.776) (1.373)

(3.974) (2.862)

(8.793) (6.977)

InjD_t+1 -40.373 *** -33.756 *** -38.049 *** -32.750 ***

(-4.558) (-3.223) (-9.885) (-7.597)

(-0.455) (-0.861)

(1.791) (0.531)

StabD_t+1 19.179 20.830 -18.013 -6.207

(0.510) (0.844) (-1.610) (-0.526)

(2.882) (3.039)

Tier1 ratio_t ・EarlyD_t+1 7.611 *** 7.966 ***

(3.721) (4.096)

EarlyD_t+1 -129.333 *** -120.680 *** -48.865 *** -52.085 ***

(-2.712) (-2.783) (-2.767) (-3.036)

Obs. 133 133 133 133 133 133 133 133

Equation No. (1) (2) (3) (4) (1) (2) (3) (4)

∆log(Loan)_t 0.008 -0.076 0.013 -0.077 -0.053 -0.214 -0.060 -0.126

(0.217) (-0.399) (0.336) (-0.410) (-1.140) (-0.832) (-1.108) (-0.565)

Loan-Deposit interest rate spred_t -7.857 *** -7.203 *** -8.052 *** -7.327 ** -7.651 *** -9.096 *** -8.437 *** -9.019 ***

(-11.323) (-2.667) (-9.740) (-2.515) (-4.506) (-3.286) (-6.524) (-4.538)

∆log(GDP)_t+1 0.498 *** -0.031 0.532 ** -0.044 0.512 -0.048 0.572 0.136

(3.242) (-0.073) (2.469) (-0.092) (1.227) (-0.091) (1.519) (0.383)

∆log(Deposit)_t+1 0.088 *** 0.000 0.102 *** 0.043

(5.976) (0.000) (2.779) (0.971)

Capital ratio_t 0.388 ** 0.027 0.435 * 0.013

(2.270) (0.042) (1.972) (0.029)

Tier1 ratio_t 0.744 0.006 0.832 0.250

(1.146) (0.006) (1.449) (0.399)

(3.597) (2.811)

Tier1 ratio_t ・InjD_t+1 2.528 ** 2.301

(2.201) (1.406)

InjD_t+1 -27.622 *** -25.456 *** -12.863 * -10.896

(-3.429) (-2.747) (-1.785) (-1.126)

Capital ratio_t ・StabD_t+1 7.540 7.231

(0.827) (0.834)

(-0.361) (-0.124)

StabD_t+1 -86.778 -83.764 65.119 4.074

(-0.975) (-0.913) (0.327) (0.042)

(-0.495) (-0.435)

(0.474) (0.355)

EarlyD_t+1 76.550 73.397 -103.739 -30.318

(0.551) (0.476) (-0.450) (-0.295)

Obs. 131 131 131 131 131 131 131 131

Equation No. (1) (2) (3) (4) (1) (2) (3) (4)

∆log(Loan)_t -0.034 0.031 -0.023 0.036 -0.027 0.033 * -0.028 0.041 **

(-1.523) (1.136) (-1.222) (1.905) (-1.363) (1.649) (-1.275) (2.544)

Loan-Deposit interest rate spred_t -1.590 * -1.905 ** -1.902 ** -2.539 *** -1.057 -1.527 * -1.607 ** -1.868 ***

(-1.802) (-2.432) (-2.563) (-4.239) (-1.270) (-1.794) (-2.202) (-2.811)

∆log(GDP)_t+1 0.362 *** 0.409 *** 0.341 *** 0.365 *** 0.398 *** 0.427 *** 0.381 *** 0.358 ***

(8.074) (7.572) (7.804) (7.331) (6.476) (8.830) (7.858) (6.477)

∆log(Deposit)_t+1 0.301 *** 0.302 *** 0.298 *** 0.314 ***

(10.698) (11.136) (12.349) (12.362)

Capital ratio_t 0.757 *** 0.374 ** 0.609 *** 0.111

(3.231) (1.970) (2.933) (0.727)

Tier1 ratio_t 1.199 *** 0.744 *** 0.934 *** 0.508 **

(3.949) (2.629) (3.212) (1.951)

Capital ratio_t ・InjD_t+1 0.813 *** 0.746 **

(2.797) (2.388)

Tier1 ratio_t ・InjD_t+1 0.467 0.630 **

(1.184) (1.969)

InjD_t+1 -14.548 *** -11.392 *** -10.462 *** -8.416 ***

(-5.328) (-3.761) (-2.870) (-3.162)

Capital ratio_t ・StabD_t+1 3.378 *** 3.276 ***

(15.766) (14.653)

Tier1 ratio_t ・StabD_t+1 3.569 *** 3.882 ***

(12.684) (13.316)

StabD_t+1 -38.698 *** -38.720 *** -30.545 *** -30.828 ***

(-14.791) (-16.757) (-8.135) (-9.315)

Capital ratio_t ・EarlyD_t+1 -0.920 *** -0.771 ***

(-4.775) (-4.173)

Tier1 ratio_t ・EarlyD_t+1 -1.518 *** -1.665 ***

(-5.391) (-5.838)

EarlyD_t+1 0.340 2.217 3.038 6.944 ***

(0.153) (1.259) (1.199) (2.928)

Obs. 557 557 557 557 556 556 556 556

Equation No. (1) (2) (3) (4) (1) (2) (3) (4)

∆log(Loan)_t -0.017 -0.028 * -0.016 -0.042 ** -0.043 *** -0.050 *** -0.041 *** -0.069 ***

(-1.151) (-1.716) (-0.928) (-2.502) (-3.201) (-2.780) (-3.087) (-4.091)

Loan-Deposit interest rate spred_t 1.692 * 1.373 1.069 0.312 3.231 *** 2.718 *** 2.938 *** 2.004 ***

(1.726) (1.518) (1.231) (0.383) (6.094) (3.967) (4.924) (2.670)

∆log(GDP)_t+1 0.805 *** 0.746 *** 0.769 *** 0.705 *** 0.763 *** 0.720 *** 0.731 *** 0.641 ***

(14.663) (16.623) (12.627) (14.252) (13.633) (11.969) (12.660) (11.882)

∆log(Deposit)_t+1 0.265 *** 0.284 *** 0.271 *** 0.312 ***

(13.277) (12.678) (14.546) (13.299)

Capital ratio_t 0.683 ** 0.319 0.542 ** -0.040

(2.255) (1.380) (2.088) (-0.205)

Tier1 ratio_t 1.587 *** 1.228 *** 1.381 *** 0.655 **

(8.399) (4.062) (7.567) (2.415)

(8.758) (8.994)

(10.170) (8.882)

InjD_t+1 -29.302 *** -24.541 *** -15.833 *** -12.453 ***

(-7.994) (-7.631) (-7.731) (-6.611)

(22.722) (22.515)

(16.099) (24.396)

StabD_t+1 -69.683 *** -72.520 *** -51.628 *** -58.579 ***

(-14.727) (-15.799) (-5.817) (-8.581)

(-0.655) (-0.321)

(-4.014) (-5.081)

EarlyD_t+1 0.600 3.925 * 8.500 *** 12.573 ***

(0.224) (1.734) (3.642) (5.945)

Obs. 549 549 549 549 548 548 548 548

Equation No. (1) (2) (3) (4) (1) (2) (3) (4)

∆log(Loan)_t -0.034 0.031 -0.023 0.036 -0.027 0.033 * -0.028 0.041 **

(-1.523) (1.136) (-1.222) (1.905) (-1.363) (1.649) (-1.275) (2.544)

Loan-Deposit interest rate spred_t -1.590 * -1.905 ** -1.902 ** -2.539 *** -1.057 -1.527 * -1.607 ** -1.868 ***

(-1.802) (-2.432) (-2.563) (-4.239) (-1.270) (-1.794) (-2.202) (-2.811)

∆log(GDP)_t+1 0.362 *** 0.409 *** 0.341 *** 0.365 *** 0.398 *** 0.427 *** 0.381 *** 0.358 ***

(8.074) (7.572) (7.804) (7.331) (6.476) (8.830) (7.858) (6.477)

∆log(Deposit)_t+1 0.301 *** 0.302 *** 0.298 *** 0.314 ***

(10.698) (11.136) (12.349) (12.362)

Capital ratio_t 0.757 *** 0.374 ** 0.609 *** 0.111

(3.231) (1.970) (2.933) (0.727)

Tier1 ratio_t 1.199 *** 0.744 *** 0.934 *** 0.508 **

(3.949) (2.629) (3.212) (1.951)

(2.797) (2.388)

Tier1 ratio_t ・InjD_t+1 0.467 0.630 **

(1.184) (1.969)

InjD_t+1 -14.548 *** -11.392 *** -10.462 *** -8.416 ***

(-5.328) (-3.761) (-2.870) (-3.162)

(15.766) (14.653)

(12.684) (13.316)

StabD_t+1 -38.698 *** -38.720 *** -30.545 *** -30.828 ***

(-14.791) (-16.757) (-8.135) (-9.315)

(-4.775) (-4.173)

(-5.391) (-5.838)

EarlyD_t+1 0.340 2.217 3.038 6.944 ***

(0.153) (1.259) (1.199) (2.928)

Obs. 557 557 557 557 556 556 556 556

Equation No. (1) (2) (3) (4) (1) (2) (3) (4)

∆log(Loan)_t -0.017 -0.028 * -0.016 -0.042 ** -0.043 *** -0.050 *** -0.041 *** -0.069 ***

(-1.151) (-1.716) (-0.928) (-2.502) (-3.201) (-2.780) (-3.087) (-4.091)

Loan-Deposit interest rate spred_t 1.692 * 1.373 1.069 0.312 3.231 *** 2.718 *** 2.938 *** 2.004 ***

(1.726) (1.518) (1.231) (0.383) (6.094) (3.967) (4.924) (2.670)

∆log(GDP)_t+1 0.805 *** 0.746 *** 0.769 *** 0.705 *** 0.763 *** 0.720 *** 0.731 *** 0.641 ***

(14.663) (16.623) (12.627) (14.252) (13.633) (11.969) (12.660) (11.882)

∆log(Deposit)_t+1 0.265 *** 0.284 *** 0.271 *** 0.312 ***

(13.277) (12.678) (14.546) (13.299)

Capital ratio_t 0.683 ** 0.319 0.542 ** -0.040

(2.255) (1.380) (2.088) (-0.205)

Tier1 ratio_t 1.587 *** 1.228 *** 1.381 *** 0.655 **

(8.399) (4.062) (7.567) (2.415)

(8.758) (8.994)

(10.170) (8.882)

InjD_t+1 -29.302 *** -24.541 *** -15.833 *** -12.453 ***

(-7.994) (-7.631) (-7.731) (-6.611)

(22.722) (22.515)

(16.099) (24.396)

StabD_t+1 -69.683 *** -72.520 *** -51.628 *** -58.579 ***

(-14.727) (-15.799) (-5.817) (-8.581)

(-0.655) (-0.321)

(-4.014) (-5.081)

EarlyD_t+1 0.600 3.925 * 8.500 *** 12.573 ***

(0.224) (1.734) (3.642) (5.945)

Obs. 549 549 549 549 548 548 548 548

𝑟𝑖,𝑡𝐿 − 𝑟𝑖,𝑡

𝑟𝑡𝐿 − 𝑟𝑡

∆ 𝑙𝑜𝑔(𝐿𝑖,𝑡+1) = 𝛼0 + 𝛼1∆ 𝑙𝑜𝑔(𝐿𝑖,𝑡) + 𝛽1𝐶𝑎𝑝𝑖,𝑡 + 𝛾1(𝑟𝑖,𝑡𝐿 − 𝑟𝑖,𝑡

𝐷 ) + 𝛾2∆ 𝑙𝑜𝑔(𝐺𝐷𝑃𝑡+1)

+𝛽2𝐶𝑎𝑝𝑖,𝑡 ∙ 𝐼𝑛𝑗𝐷𝑖,𝑡+1 + 𝛿1𝐼𝑛𝑗𝐷𝑖,𝑡+1 + 휀𝑖,𝑡+1 (1)

+𝛽3𝐶𝑎𝑝𝑖,𝑡 ∙ 𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1 + 𝛿2𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1 + 𝛽4𝐶𝑎𝑝𝑖,𝑡 ∙ 𝐸𝑎𝑟𝑙𝑦𝐷𝑖,𝑡+1 + 𝛿3𝐸𝑎𝑟𝑙𝑦𝐷𝑖,𝑡+1

+ 휀𝑖,𝑡+1 (2)′

+𝛾3∆ 𝑙𝑜𝑔(𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑖,𝑡+1) + 𝛽2𝐶𝑎𝑝𝑖,𝑡 ∙ 𝐼𝑛𝑗𝐷𝑖,𝑡+1 + 𝛿1𝐼𝑛𝑗𝐷𝑖,𝑡+1 + 휀𝑖,𝑡+1 (3)′

+ 𝛾3∆ 𝑙𝑜𝑔(𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑖,𝑡+1) + 𝛽3𝐶𝑎𝑝𝑖,𝑡 ∙ 𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1 + 𝛿2𝑆𝑡𝑎𝑏𝐷𝑖,𝑡+1

+𝛽4𝐶𝑎𝑝𝑖,𝑡 ∙ 𝐸𝑎𝑟𝑙𝑦𝐷𝑖,𝑡+1 + 𝛿3𝐸𝑎𝑟𝑙𝑦𝐷𝑖,𝑡+1 + 휀𝑖,𝑡+1 (4)′

𝑟𝑖,𝑡𝐿 𝑟𝑖,𝑡

ri,tL =

′Interste on Loans & 𝐵𝑖𝑙𝑙𝑠 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑒d′(reported on the income statement of bank i in FY t)

′Loans & 𝐵𝑖𝑙𝑙𝑠 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑒d′(on the asset side of the balance sheet of bank i in FY t)

ri,tD =

′Interste Paidon Depositst′(reported on the income statement of bank i in FY t)

′Total Deposits and Premiums′(on the liability side of the balance sheet of bank i in FY t)

Equation No. (1)' (2)' (3)' (4)' (1)' (2)' (3)' (4)'

∆log(Loan)_t 0.121 ** 0.056 0.048 0.045 0.042 -0.026 0.032 -0.057

(2.046) (0.683) (0.530) (0.512) (0.559) (-0.221) (0.273) (-0.449)

Loan-Deposit interest rate spred_i t 2.408 * 2.049 -1.828 0.699 1.043 -0.353 -1.617 0.518

(1.666) (0.951) (-0.521) (0.225) (0.440) (-0.122) (-0.347) (0.139)

∆log(GDP)_t+1 0.629 *** 0.492 * 0.281 0.358 0.792 ** 0.379 0.363 0.478

(3.021) (1.706) (0.807) (1.064) (2.451) (1.066) (0.657) (0.829)

∆log(Deposit)_t+1 -0.128 -0.042 -0.053 0.084

(-0.569) (-0.357) (-0.537) (0.729)

Capital ratio_t -0.293 * -0.168 -0.539 * -0.267

(-1.744) (-0.971) (-1.688) (-1.281)

Tier1 ratio_t 0.707 *** 0.479 * 0.469 0.555

(2.832) (1.802) (1.136) (1.420)

Capital ratio_t ・InjD_t+1 3.116 *** 6.505

(3.192) (1.517)

(11.448) (4.495)

InjD_t+1 -37.499 *** -72.552 -36.019 *** -38.823 ***

(-3.781) (-1.627) (-13.107) (-5.052)

Capital ratio_t ・StabD_t+1 -0.311 0.106

(-0.195) (0.054)

(1.759) (1.497)

StabD_t+1 -2.135 -6.778 -24.133 -22.429

(-0.112) (-0.290) (-1.585) (-1.518)

(4.389) (3.869)

Tier1 ratio_t ・EarlyD_t+1 5.938 *** 5.627 **

(2.762) (2.444)

EarlyD_t+1 -85.657 *** -91.109 *** -32.624 -29.580

(-3.503) (-3.209) (-1.463) (-1.272)

Obs. 133 133 133 133 133 133 133 133

Equation No. (1)' (2)' (3)' (4)' (1)' (2)' (3)' (4)'

∆log(Loan)_t 0.031 0.020 0.046 0.015 0.018 -0.080 0.032 -0.058

(0.543) (0.202) (0.555) (0.162) (0.291) (-0.435) 0.468601 (-0.309)

Loan-Deposit interest rate spred_i t 3.364 *** 3.556 ** 5.221 ** 2.374 2.554 ** 2.049 2.878 2.012

(2.807) (2.546) (2.576) (0.819) (2.345) (1.095) 1.43149 (0.672)

∆log(GDP)_t+1 0.825 *** 0.520 1.137 *** 0.373 0.804 *** 0.291 0.724 * 0.226

(2.674) (1.290) (2.793) (0.928) (3.402) (0.543) 1.844301 (0.470)

∆log(Deposit)_t+1 0.123 -0.028 0.085 0.047

(1.587) (-0.313) 1.241897 (0.372)

Capital ratio_t 0.231 0.087 0.258 0.051

(1.617) (0.392) (1.097) (0.249)

Tier1 ratio_t 1.008 *** 0.700 * 0.894 *** 0.686 *

(4.815) (1.921) 3.765262 (2.033)

Capital ratio_t ・InjD_t+1 1.684 1.212

(1.086) (0.533)

Tier1 ratio_t ・InjD_t+1 2.171 1.482

(1.569) 1.268709

InjD_t+1 -16.276 -10.775 -11.020 -7.493

(--1.040) (-0.462) (-1.454) -1.08359

(-0.150) (-0.320)

(-1.189) (-0.968)

StabD_t+1 11.965 28.528 83.485 79.800

(0.102) (0.262) (1.197) (0.916)

Capital ratio_t ・EarlyD_t+1 7.355 9.494

(0.524) (0.728)

(1.611) (1.216)

EarlyD_t+1 -71.803 -93.530 -137.303 * -125.506

(-0.474) (-0.671) (-1.681) (-1.181)

Obs. 131 131 131 131 131 131 131 131

On the other hand, using equation (2)' and (4)', we separately examine the each effects of these two laws.

In the case of using equation (1)' and (3)', we examine the total effect of two capital injection policies: the Financial Function Stabilization Law and the Early Strengthening Law.

Loan =SME LoansCapital Ratio Tier1 Ratio

Loan =Total LoansCapital Ratio Tier1 Ratio

Equation No. (1)' (2)' (3)' (4)' (1)' (2)' (3)' (4)'

∆log(Loan)_t 0.121 ** 0.056 0.048 0.045 0.042 -0.026 0.032 -0.057

(2.046) (0.683) (0.530) (0.512) (0.559) (-0.221) (0.273) (-0.449)

Loan-Deposit interest rate spred_i t 2.408 * 2.049 -1.828 0.699 1.043 -0.353 -1.617 0.518

(1.666) (0.951) (-0.521) (0.225) (0.440) (-0.122) (-0.347) (0.139)

∆log(GDP)_t+1 0.629 *** 0.492 * 0.281 0.358 0.792 ** 0.379 0.363 0.478

(3.021) (1.706) (0.807) (1.064) (2.451) (1.066) (0.657) (0.829)

∆log(Deposit)_t+1 -0.128 -0.042 -0.053 0.084

(-0.569) (-0.357) (-0.537) (0.729)

Capital ratio_t -0.293 * -0.168 -0.539 * -0.267

(-1.744) (-0.971) (-1.688) (-1.281)

Tier1 ratio_t 0.707 *** 0.479 * 0.469 0.555

(2.832) (1.802) (1.136) (1.420)

Capital ratio_t ・InjD_t+1 3.116 *** 6.505

(3.192) (1.517)

(11.448) (4.495)

InjD_t+1 -37.499 *** -72.552 -36.019 *** -38.823 ***

(-3.781) (-1.627) (-13.107) (-5.052)

Capital ratio_t ・StabD_t+1 -0.311 0.106

(-0.195) (0.054)

(1.759) (1.497)

StabD_t+1 -2.135 -6.778 -24.133 -22.429

(-0.112) (-0.290) (-1.585) (-1.518)

(4.389) (3.869)

Tier1 ratio_t ・EarlyD_t+1 5.938 *** 5.627 **

(2.762) (2.444)

EarlyD_t+1 -85.657 *** -91.109 *** -32.624 -29.580

(-3.503) (-3.209) (-1.463) (-1.272)

Obs. 133 133 133 133 133 133 133 133

Equation No. (1)' (2)' (3)' (4)' (1)' (2)' (3)' (4)'

∆log(Loan)_t 0.031 0.020 0.046 0.015 0.018 -0.080 0.032 -0.058

(0.543) (0.202) (0.555) (0.162) (0.291) (-0.435) 0.468601 (-0.309)

Loan-Deposit interest rate spred_i t 3.364 *** 3.556 ** 5.221 ** 2.374 2.554 ** 2.049 2.878 2.012

(2.807) (2.546) (2.576) (0.819) (2.345) (1.095) 1.43149 (0.672)

∆log(GDP)_t+1 0.825 *** 0.520 1.137 *** 0.373 0.804 *** 0.291 0.724 * 0.226

(2.674) (1.290) (2.793) (0.928) (3.402) (0.543) 1.844301 (0.470)

∆log(Deposit)_t+1 0.123 -0.028 0.085 0.047

(1.587) (-0.313) 1.241897 (0.372)

Capital ratio_t 0.231 0.087 0.258 0.051

(1.617) (0.392) (1.097) (0.249)

Tier1 ratio_t 1.008 *** 0.700 * 0.894 *** 0.686 *

(4.815) (1.921) 3.765262 (2.033)

Capital ratio_t ・InjD_t+1 1.684 1.212

(1.086) (0.533)

(1.569) 1.268709

InjD_t+1 -16.276 -10.775 -11.020 -7.493

(--1.040) (-0.462) (-1.454) -1.08359

(-0.150) (-0.320)

(-1.189) (-0.968)

StabD_t+1 11.965 28.528 83.485 79.800

(0.102) (0.262) (1.197) (0.916)

Capital ratio_t ・EarlyD_t+1 7.355 9.494

(0.524) (0.728)

(1.611) (1.216)

EarlyD_t+1 -71.803 -93.530 -137.303 * -125.506

(-0.474) (-0.671) (-1.681) (-1.181)

Obs. 131 131 131 131 131 131 131 131

Loan =SME LoansCapital Ratio Tier1 Ratio

Equation No. (1)' (2)' (3)' (4)' (1)' (2)' (3)' (4)'

∆log(Loan)_t 0.150 *** 0.184 *** 0.129 *** 0.161 *** 0.145 *** 0.177 *** 0.114 *** 0.148 ***

(10.779) (8.630) (8.509) (7.946) (19.498) (13.524) (10.578) (9.065)

Loan-Deposit interest rate spred_i t 7.948 *** 7.184 *** 6.961 *** 5.908 *** 6.680 *** 6.063 *** 5.648 *** 5.131 ***

(8.821) (7.419) (6.356) (5.030) (16.849) (12.549) (7.965) (6.636)

∆log(GDP)_t+1 0.614 *** 0.552 *** 0.514 *** 0.502 *** 0.591 *** 0.566 *** 0.509 *** 0.504 ***

(14.318) (6.377) (12.588) (6.866) (13.980) (13.960) (11.613) (11.188)

∆log(Deposit)_t+1 0.287 *** 0.285 *** 0.292 *** 0.292 ***

(11.084) (10.446) (11.019) (11.900)

Capital ratio_t 1.714 *** 1.579 *** 1.722 *** 1.476 ***

(10.575) (8.440) (9.542) (7.147)

Tier1 ratio_t 2.134 *** 1.886 *** 2.116 *** 1.795 ***

(33.170) (15.584) (14.093) (10.064)

(3.725) (2.531)

(1.038) (0.613)

InjD_t+1 -6.909 *** -3.972 * -1.357 1.755

(-3.208) (-1.894) (-0.962) (1.188)

(12.760) (12.171)

(11.438) (13.222)

StabD_t+1 -45.470 *** -42.098 *** -20.726 *** -21.304 ***

(-13.000) (-13.941) (-4.705) (-6.065)

(-5.786) (-5.098)

(-8.616) (-7.877)

EarlyD_t+1 14.419 *** 14.827 *** 10.315 *** 13.033 ***

(4.165) (4.669) (5.507) (6.196)

Obs. 545 545 545 545 544 544 544 544

Equation No. (1)' (2)' (3)' (4)' (1)' (2)' (3)' (4)'

∆log(Loan)_t 0.131 *** 0.090 *** 0.105 *** 0.052 *** 0.112 *** 0.087 *** 0.091 *** 0.045 ***

(11.711) (5.463) (7.882) (2.694) (10.818) (5.569) (8.755) (2.937)

Loan-Deposit interest rate spred_i t 5.771 *** 2.693 ** 5.631 *** 2.010 ** 4.710 *** 3.483 *** -4.283 *** 2.879 ***

(7.521) (2.405) (10.055) (2.115) (6.883) (6.145) 5.167497 (4.836)

∆log(GDP)_t+1 0.814 *** 0.700 *** -14.276 *** 0.651 *** 0.747 *** 0.707 *** 0.697 *** 0.636 ***

(14.523) (10.014) (-6.381) (12.577) (13.985) (10.420) (14.067) (12.281)

∆log(Deposit)_t+1 0.325 *** 0.318 *** 0.302 *** 0.322 ***

(15.940) (13.143) (16.300) (13.914)

Capital ratio_t 1.291 *** 0.679 *** 0.748 *** 0.455 **

(6.396) (3.052) (17.538) (2.214)

Tier1 ratio_t 1.515 *** 1.019 *** 1.157 *** 0.729 ***

(14.367) (11.619) (8.246) (7.100)

(9.272) (7.437)

(10.747) (9.805)

InjD_t+1 -15.883 *** 2.593 *** -7.020 *** -7.163 ***

(-5.994) (11.609) (-5.169) (-4.431)

(12.451) (15.597)

(12.579) (15.975)

StabD_t+1 -54.997 *** -59.229 *** -35.081 *** -36.362 ***

(-11.221) (-16.278) (-7.572) (-11.803)

Capital ratio_t ・EarlyD_t+1 -0.406 -0.561 *

(-1.010) (-1.743)

Tier1 ratio_t ・EarlyD_t+1 -0.475 -0.629 **

(-1.254) (-2.099)

EarlyD_t+1 4.099 8.483 *** 5.557 *** 8.974 ***

(1.101) (3.082) (2.721) (5.629)

Obs. 539 539 539 539 538 538 538 538

Loan =SME Loans

Capital Ratio Tier1 Ratio

Equation No. (1)' (2)' (3)' (4)' (1)' (2)' (3)' (4)'

∆log(Loan)_t 0.150 *** 0.184 *** 0.129 *** 0.161 *** 0.145 *** 0.177 *** 0.114 *** 0.148 ***

(10.779) (8.630) (8.509) (7.946) (19.498) (13.524) (10.578) (9.065)

Loan-Deposit interest rate spred_i t 7.948 *** 7.184 *** 6.961 *** 5.908 *** 6.680 *** 6.063 *** 5.648 *** 5.131 ***

(8.821) (7.419) (6.356) (5.030) (16.849) (12.549) (7.965) (6.636)

∆log(GDP)_t+1 0.614 *** 0.552 *** 0.514 *** 0.502 *** 0.591 *** 0.566 *** 0.509 *** 0.504 ***

(14.318) (6.377) (12.588) (6.866) (13.980) (13.960) (11.613) (11.188)

∆log(Deposit)_t+1 0.287 *** 0.285 *** 0.292 *** 0.292 ***

(11.084) (10.446) (11.019) (11.900)

Capital ratio_t 1.714 *** 1.579 *** 1.722 *** 1.476 ***

(10.575) (8.440) (9.542) (7.147)

Tier1 ratio_t 2.134 *** 1.886 *** 2.116 *** 1.795 ***

(33.170) (15.584) (14.093) (10.064)

(3.725) (2.531)

(1.038) (0.613)

InjD_t+1 -6.909 *** -3.972 * -1.357 1.755

(-3.208) (-1.894) (-0.962) (1.188)

(12.760) (12.171)

(11.438) (13.222)

StabD_t+1 -45.470 *** -42.098 *** -20.726 *** -21.304 ***

(-13.000) (-13.941) (-4.705) (-6.065)

(-5.786) (-5.098)

(-8.616) (-7.877)

EarlyD_t+1 14.419 *** 14.827 *** 10.315 *** 13.033 ***

(4.165) (4.669) (5.507) (6.196)

Obs. 545 545 545 545 544 544 544 544

Equation No. (1)' (2)' (3)' (4)' (1)' (2)' (3)' (4)'

∆log(Loan)_t 0.131 *** 0.090 *** 0.105 *** 0.052 *** 0.112 *** 0.087 *** 0.091 *** 0.045 ***

(11.711) (5.463) (7.882) (2.694) (10.818) (5.569) (8.755) (2.937)

Loan-Deposit interest rate spred_i t 5.771 *** 2.693 ** 5.631 *** 2.010 ** 4.710 *** 3.483 *** -4.283 *** 2.879 ***

(7.521) (2.405) (10.055) (2.115) (6.883) (6.145) 5.167497 (4.836)

∆log(GDP)_t+1 0.814 *** 0.700 *** -14.276 *** 0.651 *** 0.747 *** 0.707 *** 0.697 *** 0.636 ***

(14.523) (10.014) (-6.381) (12.577) (13.985) (10.420) (14.067) (12.281)

∆log(Deposit)_t+1 0.325 *** 0.318 *** 0.302 *** 0.322 ***

(15.940) (13.143) (16.300) (13.914)

Capital ratio_t 1.291 *** 0.679 *** 0.748 *** 0.455 **

(6.396) (3.052) (17.538) (2.214)

Tier1 ratio_t 1.515 *** 1.019 *** 1.157 *** 0.729 ***

(14.367) (11.619) (8.246) (7.100)

(9.272) (7.437)

(10.747) (9.805)

InjD_t+1 -15.883 *** 2.593 *** -7.020 *** -7.163 ***

(-5.994) (11.609) (-5.169) (-4.431)

(12.451) (15.597)

(12.579) (15.975)

StabD_t+1 -54.997 *** -59.229 *** -35.081 *** -36.362 ***

(-11.221) (-16.278) (-7.572) (-11.803)

Capital ratio_t ・EarlyD_t+1 -0.406 -0.561 *

(-1.010) (-1.743)

Tier1 ratio_t ・EarlyD_t+1 -0.475 -0.629 **

(-1.254) (-2.099)

EarlyD_t+1 4.099 8.483 *** 5.557 *** 8.974 ***

(1.101) (3.082) (2.721) (5.629)

Obs. 539 539 539 539 538 538 538 538

Loan =SME Loans

Capital Ratio Tier1 Ratio

crawford school of public policyinjection number marks preferred stock subordinated bonds / loans...

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