Nivorozhkin, Eugene (Department of Economics, School of Economics and Commercial Law, Göteborg University)
Abstract
The paper analyzes the mandatory subordinated debt proposals in banking. It theoretically investigates the role of subordinated debt as a buffer against losses for the deposit insurer, and its role in providing direct and indirect market discipline. The incorporation of bankruptcy cost in the framework of the analysis provides some new evidence to the potential role of subordinated debt. The extent of market discipline of subordinated debt critically depends on its relative magnitude to senior debt and the bankruptcy costs. Under specified conditions, the subordinated debt prices are found to provide additional information about the value of bank assets relative to equity prices. The issues of the credibility of the proposed subordinated debt schemes are also discussed. The results indicate the critical role of regulator’s judgment in interpreting and acting upon the information from the subordinated debt prices.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Göteborg University, Department of Economics in its series Working Papers in Economics with number
44.
Length: 48 pages Date of creation: 23 May 2001 Date of revision:
15 Oct 2001 Handle: RePEc:hhs:gunwpe:0044
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, Göteborg University Box 640, SE 405 30 GÖTEBORG, Sweden Phone: 031-773 10 00 Web page: http://www.handels.gu.se/econ/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Jens Anmark).
Find related papers by JEL classification: G12 - Financial Economics - - General Financial Markets - - - Asset Pricing G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Did you know? You can create a compilation of all publications of a group of people, say alumni of a program, your students or memers of an association.