Economics at your fingertips  

Bank risk‐taking and market discipline: Evidence from CoCo bonds in Korea

Younghwan Lee and Haerang Park

Journal of Futures Markets, 2020, vol. 40, issue 6, 885-894

Abstract: We investigate whether the risk profile of contingent convertible (CoCo) bonds is well‐priced by testing the sensitivity of bond spreads to bank asset volatility. While equity holders (bankers) have an incentive to make riskier investments to trigger the write‐off, such risk‐taking behavior can be contained if CoCo bond investors punish it by demanding higher returns. We have found that investors in the Korean financial market understand the risk profile of CoCo bonds and require higher returns for the additional bank risk, which suggests the presence of market discipline with regard to CoCo bonds.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2020-06-20
Handle: RePEc:wly:jfutmk:v:40:y:2020:i:6:p:885-894