On the Preferences of Coco Bond Buyers and Sellers: A Logistic Regression Analysis

39 Pages Posted: 21 Mar 2019

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Woo-Young Kang

Brunel University London - Department of Economics and Finance

Date Written: 2019

Abstract

This paper estimates the preference scores of CoCo bond buyers and sellers by running logistic regressions taking into account both bond and issuing bank’s characteristics, and also considers the role of country−specific CoCo bond market competitiveness. Buyers are found to be characterised by stronger preference responses to CoCo bond coupons and credit ratings, while sellers are more sensitive to CoCo bond issue size and financial characteristics including return on common equity, price−to−book ratio and total regulatory capital to risk−weighted asset ratio. Further, sizeable responses to CoCo bond and issuing bank’s characteristics are found in most European countries, Brazil, Mexico and China, the strongest responses being estimated in the case of the UK and China.

Keywords: CoCo bonds, buyers and sellers, preference scores, logistic regressions

JEL Classification: C250, C390, F390, G110, G210, G240, G280

Suggested Citation

Caporale, Guglielmo Maria and Kang, Woo-Young, On the Preferences of Coco Bond Buyers and Sellers: A Logistic Regression Analysis (2019). CESifo Working Paper No. 7551. Available at SSRN: https://ssrn.com/abstract=3357128

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

Kingston Lane
Marie Jahoda Building
Uxbridge, Middlesex UB8 3PH
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+44 1895 266713 (Phone)
+44 1895 269770 (Fax)

HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Woo-Young Kang

Brunel University London - Department of Economics and Finance ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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