CoCo issuance and bank fragility

• 成果类型: Article
• 署名作者: Avdjiev, Stefan; Bogdanova, Bilyana; Bolton, Patrick; Jiang, Wei; Kartasheva, Anastasia
• 署名单位: Bank for International Settlements (BIS); Columbia University; Imperial College London; University of St Gallen; University of Pennsylvania
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.06.008
• 发表日期: 2020
• 页码: 593-613
• 关键词: Contingent convertible capital securities; Bail-in; Bank fragility

摘要

The promise of contingent convertible capital securities (CoCos) as a bail-in solution has been the subject of considerable theoretical analysis and debate, but little is known about their effects in practice. We undertake the first comprehensive empirical analysis of bank CoCo issues, a market segment that comprises over 730 instruments totaling $521 billion. Four main findings emerge: (1) the propensity to issue a CoCo is higher for larger and better capitalized banks; (2) CoCo issues result in a statistically significant decline in issuers' CDS spread, indicating that they generate risk-reduction benefits and lower costs of debt (this is especially true for CoCos that convert into equity, have mechanical triggers, and are classified as Additional Tier 1 instruments); (3) CoCos with only discretionary triggers do not have a significant impact on CDS spreads; and (4) CoCo issues have no statistically significant impact on stock prices, except for principal write-down CoCos with a high trigger level, which have a positive effect. (C) 2020 Elsevier B.V. All rights reserved.