Raising Capital When the Going Gets Tough: U.S. Bank Equity Issuance from 2001 to 2014

We analyze equity issuance by publicly-traded U.S. banks during 2001-2014 through exchanges (SEOs), private placements (PIPEs), and TARP. Equity markets were important for bank recapitalization in the crisis, when SEO and PIPE issuance peaked. We find that bank characteristics predict issuance whereas trading indicators influence issuance type. Large, well-capitalized banks with quality loans were more likely to issue. PIPEs served weaker, capital-constrained banks, while SEOs and TARP were selective. Bank illiquidity was another incentive to issue. Banks with lower trading activity and wider spreads were more likely to issue TARP over SEOs. Our findings suggest TARP aided private issuance, which was used to repay TARP.