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A reconsideration of the risk sensitivity of U.S. banking organization subordinated debt spreads: a sample selection approach

  • Daniel M. Covitz
  • Diana Hancock
  • Myron L. Kwast
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    The authors estimate a sample selection model over three distinct regulatory "regimes" when the treatment of bank bondholders (in the event of bank failures) differed substantially. They then estimate their selection model to test the strength of bond market discipline over these three regulatory regimes, finding that bank bond spreads are positively associated with bank risk measures during all three regimes, even during the too-big-to-fail period.

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    File URL: http://www.newyorkfed.org/research/epr/04v10n2/0409Covi.pdf
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    Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

    Volume (Year): (2004)
    Issue (Month): Sep ()
    Pages: 73-92

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    Handle: RePEc:fip:fednep:y:2004:i:sep:p:73-92:n:v.10no.2
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    1. Diana Hancock & Myron L. Kwast, 2001. "Using subordinated debt to monitor bank holding companies: is it feasible?," Finance and Economics Discussion Series 2001-22, Board of Governors of the Federal Reserve System (U.S.).
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