A Survey of Contingent Convertible Bond for Banks

• Main Authors: Yi-Ting Liao, 廖怡婷
• Other Authors: Min-Teh Yu
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/03854704240239204885

碩士 === 國立臺灣大學 === 財務金融學研究所 === 100 === With the regulations of the New Basel Capital Accord and severe macroeconomic environment, banking groups will face meet more challenges than ever. With the characteristics like convertible bonds , contingent convertible bonds could be converted into equity by the clauses in the contracts of contingent convertible bonds, as the designed ratio regarding common equity to assets or other specific ratios below the triggers of contracts. After the analysis in this study, the conclusions in this study are listed as following: First, under on the market-based ratios or risk-adjusted values of assets, contingent convertible bonds could strengthen the efficiency of regulation and lower the risks of banking groups ,by higher ratio of common equity to assets. Second, from the raising fund-raising process of case banking groups, contingent convertible bonds could lower the risk of bankrupt and reduce the expected liquid risk premiums of investors, leading to the efficient cost of capital. The results support the conclusions of Glasserman and Nouri（2012） and avoid the adverse selection proposed by Myers and Majluf（1984）.Third, Murphy, Walsh and Willison（2012） has argued that the influences of bank governance of contingent convertible bonds result from the existence of contingent convertible bonds could lower the cash flows the management control , leading to less risks inherent in the high risk projects. Therefore, contingent convertible bonds could lower agent costs and enhance the efficiency of bank governance. Fourth,higher ratio of common equity to assets and higher coupon rates could fit the demands of fixed-income-based institute investors.