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Hybrid capital instruments in the financial industry

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  • Salzmann, Sebastian
  • Fahling, Ernst

Abstract

The number and issuances of hybrid capital instruments are growing, especially since the introduction of regulatory capital requirements by the Basel Accords in 1988. This paper analyses the major developments in the hybrid capital market. As the largest issuer of hybrid capital this paper focuses on the financial industry. The main driver behind the market developments is regulatory capital requirements and a major constraint for market growth is the credit rating. Statistical tests accept the hypothesis that rated banks are more likely to issue hybrid capital than banks without a credit rating. Furthermore the level of the Tier 1 ratio has a huge influence on the type of hybrid security, which is issued to fulfil the regulatory capital requirements.

Suggested Citation

  • Salzmann, Sebastian & Fahling, Ernst, 2016. "Hybrid capital instruments in the financial industry," ISM Research Journal, International School of Management (ISM), Dortmund, vol. 3(1), pages 33-56.
    • Handle: RePEc:zbw:ismrjl:324689
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    References listed on IDEAS

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    3. Peiyi Yu & Bac Van Luu, 2012. "Lessons from the collapse in hybrid bank capital securities," International Journal of Management Practice, Inderscience Enterprises Ltd, vol. 5(2), pages 125-148.
    4. A. Colin Cameron & Pravin K. Trivedi, 2010. "Microeconometrics Using Stata, Revised Edition," Stata Press books, StataCorp LLC, number musr, July.
    5. Darren J. Kisgen, 2006. "Credit Ratings and Capital Structure," Journal of Finance, American Finance Association, vol. 61(3), pages 1035-1072, June.
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