Are CoCo Bonds a Good Substitute for Equity? Evidence from European Banks

H. Hau, Gabriela Hrasko
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引用次数: 3

Abstract

Following the 2008-9 financial crisis, large banks increasingly issued contingent convertible bonds (CoCo bonds) to increase their capital buffers – a policy supported by national bank regulators. This paper examines whether the issuance of CoCo bonds provides the same reduction in bank default risk as the corresponding issuance of common equity by analyzing the premium reduction in (single name) credit default swaps (CDS) around the corresponding issuance announcement events. We find that the default risk reduction associated with issuance crucially depends on the CoCo bond’s design features: Only CoCo bond designs with permanent write-down features provide a default risk reduction similar to equity. CoCo bonds with equity conversion features come with a lower subsequent volatility of the bank asset value, but are inferior to equity in terms of their default risk reduction.
CoCo债券是股票的好替代品吗?来自欧洲银行的证据
2008- 2009年金融危机之后,大型银行越来越多地发行或有可转换债券(CoCo债券),以增加资本缓冲——这是一项得到各国银行监管机构支持的政策。本文通过分析(单名)信用违约互换(CDS)在发行公告事件前后溢价的降低,来检验CoCo债券的发行是否提供了与普通股发行相同的银行违约风险降低。我们发现,与发行相关的违约风险降低在很大程度上取决于CoCo债券的设计特征:只有具有永久减记特征的CoCo债券设计才能提供类似于股权的违约风险降低。具有股权转换特征的CoCo债券,其银行资产价值的后续波动率较低,但在违约风险降低方面不如股权。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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