The impact of TARP on bank efficiency

► We examine the change in efficiency scores of banks that received funding from the Trouble Assets Relief Program (TARP). ► We employ Data Envelopment Analysis technique (DEA) to measure efficiency. ► TARP banks experience larger decreases in efficiency than non-TARP banks upon receipt of funding from TARP. ► When the likelihood of receiving the capital injection is higher, the change in bank efficiency is worse. ► We attribute the decreases in efficiency to bailout related moral hazards.