Contingent Convertibles with Stock Price Triggers: The Case of Perpetuities
成果类型：
Article
署名作者：
Pennacchi, George; Tchistyi, Alexei
署名单位：
University of Illinois System; University of Illinois Urbana-Champaign
刊物名称：
REVIEW OF FINANCIAL STUDIES
ISSN/ISSBN：
0893-9454
DOI：
10.1093/rfs/hhy092
发表日期：
2019
页码：
2302
关键词：
摘要：
Initial proposals for contingent convertibles (CoCos) envisioned that these bonds would convert to equity when the issuing bank's stock price declined to a prespecified trigger. Subsequent research has claimed that doing so causes the stock price to have multiple equilibria or no equilibrium. We show that when CoCos are perpetuities, which characterizes most actual CoCos, a unique stock price equilibrium exists, except under unrealistic conditions. Unique equilibria occur when conversion favors or disfavors CoCo investors, when CoCos convert to equity or are written down, and when CoCos are callable. We also analyze a bank's risk choices before and after conversion.
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