The Impact of Contingent Convertible Bond Issuance on Bank Credit Risk
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F16%3A00091075" target="_blank" >RIV/00216224:14560/16:00091075 - isvavai.cz</a>
Result on the web
<a href="http://is.muni.cz/do/econ/sborniky/2016/EFS2016-Proceedings_september_2.pdf" target="_blank" >http://is.muni.cz/do/econ/sborniky/2016/EFS2016-Proceedings_september_2.pdf</a>
DOI - Digital Object Identifier
—
Alternative languages
Result language
angličtina
Original language name
The Impact of Contingent Convertible Bond Issuance on Bank Credit Risk
Original language description
Contingent convertible bonds are designed to provide additional capital to banks in times of distress and discourage the risk-taking incentives of the stockholders and, hence, decrease bank credit risk. In this paper, we study bank CDS spreads as a proxy of credit risk during the periods around the announcement of contingent convertible bond issuance. We analyze whether investors see these bonds as signs of possible bank distress or the stabilizing mechanism decreasing the probability of bank default. We use event study methodology where abnormal CDS spreads are identified based on constant mean return model and basic market model. Our data sample consists of 41 banks with 109 current unique issues taken from Bloomberg. Our results indicate that CDS spreads show a systemic reaction to the announcement of contingent convertible instruments and are economically significant for the bond holders that value the decreased default probability and reduced risk incentives of the issuing institution.
Czech name
—
Czech description
—
Classification
Type
D - Article in proceedings
CEP classification
AE - Management, administration and clerical work
OECD FORD branch
—
Result continuities
Project
—
Continuities
S - Specificky vyzkum na vysokych skolach
Others
Publication year
2016
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Article name in the collection
European Financial Systems 2016. Proceedings of the 13th International Scientific Conference
ISBN
9788021083080
ISSN
—
e-ISSN
—
Number of pages
9
Pages from-to
102-110
Publisher name
Masaryk University
Place of publication
Brno
Event location
Brno
Event date
Jan 1, 2016
Type of event by nationality
WRD - Celosvětová akce
UT code for WoS article
000385692200013