The agency of CoCos: Why contingent convertible bonds are not for everyone

Roman Goncharenko*, Steven Ongena, Asad Rauf

*Bijbehorende auteur voor dit werk

OnderzoeksoutputAcademicpeer review

8 Citaten (Scopus)
225 Downloads (Pure)


Some regulators grant contingent convertible bonds (CoCos) the status of "going-concern" capital. Theory, however, suggests that CoCos can induce debt overhang, thereby amplifying the leverage ratchet effect. In this paper, we provide empirical evidence consistent with this theory. Our results suggest that banks with more volatile assets (riskier banks) (i) are less likely to issue CoCos, (ii) conditional on having CoCos outstanding are less likely to issue equity, and (iii) prefer issuing equity over CoCos. Since riskier banks suffer from more debt overhang it is more costly for them to issue CoCos.

Originele taal-2English
Aantal pagina's22
TijdschriftJournal of Financial Intermediation
StatusPublished - okt.-2021

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