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dc.creatorHesse, Henning
dc.date.accessioned2021-09-28T09:33:59Z
dc.date.available2021-09-28T09:33:59Z
dc.date.issued2018-05-01
dc.identifier.urihttps://fif.hebis.de/xmlui/handle/123456789/2314
dc.description.abstractDeparting from the principle of absolute priority, CoCo bonds are particularly exposed to bank losses despite not having ownership rights. This paper shows the link between adverse CoCo design and their yields, confirming the existence of market monitoring in designated bail-in debt. Specifically, focusing on the write-down feature as loss absorption mechanism in CoCo debt, I do find a yield premium on this feature relative to equity-conversion CoCo bonds as predicted by theoretical models. Moreover, and consistent with theories on moral hazard, I find this premium to be largest when existing incentives for opportunistic behavior are largest, while this premium is non-existent if moral hazard is perceived to be small. The findings show that write-down CoCo bonds introduce a moral hazard problem in the banks. At the same time, they support the idea of CoCo investors acting as monitors, which is a prerequisite for a meaningful role of CoCo debt in banks' regulatory capital mix.
dc.rightsAttribution-ShareAlike 4.0 International
dc.rights.urihttp://creativecommons.org/licenses/by-sa/4.0/
dc.subjectMacro Finance
dc.titleIncentive Effects from Write-down CoCo Bonds: An Empirical Analysis
dc.typeWorking Paper
dcterms.referenceshttps://fif.hebis.de/xmlui/handle/123456789/1354?Bloomberg
dcterms.referenceshttps://fif.hebis.de/xmlui/handle/123456789/1496?SNL
dcterms.referenceshttps://fif.hebis.de/xmlui/handle/123456789/1456?Markit
dc.source.filename212_SSRN-id2797203
dc.identifier.safeno212
dc.subject.keywordscoco bonds
dc.subject.keywordscontingent capital
dc.subject.keywordsendogenous risk
dc.subject.keywordscapital structure
dc.subject.keywordsincentives
dc.subject.keywordsmonitoring
dc.subject.jelG18
dc.subject.jelG21
dc.subject.jelG32
dc.subject.topic1compare
dc.subject.topic1control
dc.subject.topic1dependent
dc.subject.topic2monitor
dc.subject.topic2absence
dc.subject.topic2contribute
dc.subject.topic3table
dc.subject.topic3period
dc.subject.topic3relative
dc.subject.topic1nameFinancial Markets
dc.subject.topic2nameCorporate Governance
dc.subject.topic3nameStability and Regulation
dc.identifier.doi10.2139/ssrn.2797203


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Attribution-ShareAlike 4.0 International
Except where otherwise noted, this item's license is described as Attribution-ShareAlike 4.0 International