The global economic crisis has contributed to the economic struggling in most developing countries. This is visible in the challenges’ combating their financial systems as evidence among most African countries including Nigeria. It has... more
The global economic crisis has contributed to the economic struggling in most developing countries. This is visible in the challenges’ combating their financial systems as evidence among most African countries including Nigeria. It has also exposed weaknesses in the functioning of their economy and led to calls for reform of the financial architecture. The crisis presents inconsistency in the economic growth of most developing nations, most especially among African countries because it is happening at a time when the region is making progress in economic performance and management (Benjamin-Addy, 2012). Therefore, present dwindling states of Nigeria economy has place a question on effectiveness and efficiency of the Nigeria financial system (Abiola&Olausi, 2014). This is due to the present financial instability ravaging the country’s economy, with some financial analyst clamouring for recapitalization of banks. They opine that, recapitalization of banks in Nigeria is one of the right steps towards building a vibrant, competent and diversified economy in the present time. The clamour for recapitalization was based on the need to increase the capital based on banks to enable effectiveness.
Exploiting the Japanese banking crisis of the 1990s as a laboratory, we investigate the effects of bank bailouts on the supply of credit and the performance of banks' clients. Our findings indicate that the size of capital injections... more
Exploiting the Japanese banking crisis of the 1990s as a laboratory, we investigate the effects of bank bailouts on the supply of credit and the performance of banks' clients. Our findings indicate that the size of capital injections relative to the initial financial condition of banks is crucial for the success of bank bailouts. Capital injections that are large enough to reestablish bank capital requirements increase the supply of credit and spur investment. In contrast, not only do capital injections that are too small fail to increase the supply of credit, but they also encourage the evergreening of nonperforming loans. (JEL E44, G21, G28, G32, G34)
