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  • September 2019
  • Article
  • Review of Corporate Finance Studies

Contingent Capital Trigger Effects: Evidence from Liability Management Exercises

By: Boris Vallée
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Abstract

This paper investigates the so called liability management exercises by European banks, which bear comparable effects to triggering contingent capital. I first explore the determinants of these exercises. I then study market reactions to these operations as well as banks' economic performance following them. Debtors positively receive these exercises, while stockholders discriminate according to the terms of the operation. Moreover, banks implementing liability management exercises exhibit higher economic performance than the ones that do not. These findings point towards contingent capital offering an effective solution to the dilemma of bank capital regulation.

Keywords

Contingent Capital; Financial Distress; Regulatory Capital; Financial Institutions; Legal Liability; Management; Banking Industry; Europe

Citation

Vallée, Boris. "Contingent Capital Trigger Effects: Evidence from Liability Management Exercises." Review of Corporate Finance Studies 8, no. 2 (September 2019): 235–259.
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About The Author

Boris Vallee

Finance
→More Publications

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More from the Author
  • FinTech Lending and Cashless Payments By: Boris Vallée, Pulak Ghosh and Yao Zeng
  • The Effects of Local Government Financial Distress: Evidence from Toxic Loans By: Boris Vallee and Julien Sauvagnat
  • A Case in Point: Shared Home Equity By: Daniel Green, Boris Vallee, Sid Beaumaster and Yang (Dolly) Yu
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