The impact of CoCo bonds on banking system's net value

Ping Li, Yanhong Guo, Hui Meng and Lixin Huang

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: This paper investigates the impact of Contingent Convertible (CoCo) bonds on systemic financial risk by considering the banking system's net value. We first conduct a theoretical analysis of how CoCo bonds affect the net value of banking system by considering the loss contagion and liquidity risk. Then, we use data from 15 Chinese commercial banks to illustrate our results and obtain some interesting findings. Specifically, we provide the changing trend of systemic net value with respect to shocks and the amount of write-down (WD) bonds, showing that WD bonds can save banks from the dilemma. Finally, we present some suggestions for commercial banks.

Keywords: CoCo bonds; systemic risk; net value (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000642

DOI: 10.1016/j.frl.2022.102743

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