Do contingent convertible bonds reduce systemic risk?

Tipo
Artigos

Ano
09/05/2022

Linha de Pesquisa
Administração e Economia de Negócios

Autor(es)
Layla dos Santos Mendes, Rodrigo de Oliveira Leite, José Fajardo

Orientador

https://doi.org/10.1016/j.intfin.2022.101554


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Journal of International Financial Markets, Institutions and Money, v. 78, 101554. Abstract: In this paper, we implement an empirical analysis to discuss the impact of CoCo bond issuance on the systemic risk using three systemic risk measures for banks: SRISKSES and ΔCoVaR. Our results show that issuing CoCo bonds the first time decreases systemic risk as a positive response to a future crisis. However, the second issuance increases the systemic risk, possibly by demonstrating a higher risk of financial distress or capital needs. Moreover, we provide evidence that smaller banks, banks with larger loans ratios to their total assets, and banks with unstable sources of funding are more benefited by CoCo issuance. We also perform robustness checks for all the findings and discuss policy implications.

Keywords: Systemic risk, CoCo bonds, Crisis.

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