The agency of CoCo: why do banks issue contingent convertible bonds?

Why do banks issue contingent convertible debt? To answer this question we study comprehensive data covering all issues by publicly traded banks in Europe of contingent convertible bonds (CoCos) that count as additional 
Why do banks issue contingent convertible debt? To answer this question we study comprehensive data covering all issues by publicly traded banks in Europe of contingent convertible bonds (CoCos) that count as additional tier 1 capital (AT1). We find that banks with lower asset volatility are more likely to issue AT1 CoCos than their riskier counterparts, but that CDS spreads do not react following issue announcements. Our estimates therefore suggest that agency costs play a crucial role in banks' ability to successfully issue CoCos. The agency costs may be higher for CoCos than for equity explaining why we observe riskier or lowly capitalized banks to issue equity rather than CoCos. 
show moreshow less

Download full text files

Export metadata

  • Export Bibtex
  • Export RIS

Additional Services

    Share in Twitter Search Google Scholar
Metadaten
Author:Roman Goncharenko, Steven Ongena, Asad Rauf
URN:urn:nbn:de:hebis:30:3-437353
URL:https://ssrn.com/abstract=3067909
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 586
Series (Serial Number):CFS working paper series (586)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2017
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2017/11/14
Tag:Bank Capital Structure; CoCos; Contingent Convertible Bonds
Pagenumber:40
HeBIS PPN:423347144
Institutes:Wirtschaftswissenschaften
Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:G01 Financial Crises (Updated!)
G12 Asset Pricing; Trading volume; Bond Interest Rates
G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies (Updated!)
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

$Rev: 11761 $