Announcement Effects of Contingent Convertible Securities: Evidence from the Global Banking Industry

26 Pages Posted: 10 Jan 2017

See all articles by Manuel Ammann

Manuel Ammann

University of St. Gallen - School of Finance

Kristian Blickle

Federal Reserve Banks - Federal Reserve Bank of New York

Christian Ehmann

University of St. Gallen - School of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: January 2017

Abstract

This paper investigates the announcement effects of CoCo bonds issued by global banks between January 2009 and June 2014. Using a sample of 34 financial institutions, we examine abnormal stock price reactions and CDS spread changes before and after the announcement dates. We find that the announcement of CoCos correlates with positive abnormal stock returns and negative CDS spread changes in the immediate post‐announcement period. We explain these effects with a set of theories including the lowered probability of costly bankruptcy proceedings, a signaling framework based on pecking order theory and the cost advantage of CoCos over equity (tax shield).

Keywords: contingent convertible securities, CoCo bonds, announcement effects, event study

Suggested Citation

Ammann, Manuel and Blickle, Kristian and Ehmann, Christian, Announcement Effects of Contingent Convertible Securities: Evidence from the Global Banking Industry (January 2017). European Financial Management, Vol. 23, Issue 1, pp. 127-152, 2017. Available at SSRN: https://ssrn.com/abstract=2896447 or http://dx.doi.org/10.1111/eufm.12092

Manuel Ammann (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Kristian Blickle

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Christian Ehmann

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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