TY  - CHAP
AB  - Abstract This study develops a multi-period structural model to value bank subordinated debt (subdebt) under different regulatory policies. The model provides a complete framework for analyzing how various factors, such as credit and interest rate risks, bank characteristics, and regulatory policies, affect subdebt prices and yield spreads. It finds that the implementation of Prompt Corrective Action (PCA) will raise subdebt prices and lower subdebt spreads, while capital forbearance will have the opposite effects. Also, subdebt spreads are less sensitive to bank risk when PCA is imposed than when capital forbearance occurs. The results of the paper suggest that enhancing market discipline through giving subdebt investors more rights to force timely reorganization of weak banks will reduce the subdebt spreads required by investors.
VL  - 5
SN  - 978-1-78743-409-7, 978-1-78743-410-3/2514-4650
DO  - 10.1108/S2514-465020170000001004
UR  - https://doi.org/10.1108/S2514-465020170000001004
AU  - Lee Jin-Ping
AU  - Lin Edward M.H.
AU  - Yu Min-Teh
AU  - Zhao Yang
PY  - 2017
Y1  - 2017/01/01
TI  - Bank Capital Standards and Subordinated Debt Prices
T2  - Advances in Pacific Basin Business Economics and Finance
T3  - Advances in Pacific Basin Business, Economics and Finance
PB  - Emerald Publishing Limited
SP  - 77
EP  - 99
Y2  - 2024/04/20
ER  -