Economic Consequences of Mandatory Bail-in

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Author(s)

Detail(s)

Original languageEnglish
Publication statusPublished - Aug 2019
Externally publishedYes

Conference

Title103rd American Accounting Association Annual Meeting, AAA 2019
PlaceUnited States
CitySan Francisco
Period10 - 14 August 2019

Abstract

The European Union adopted bail-in provisions that require creditors to absorb losses either through write-down or conversion of debt to equity when banks are close to insolvency. I find negative shareholder reactions and positive creditor reactions to events associated with bail-in adoption. Further analysis shows that the positive creditor reactions are primarily driven by debt instruments that have higher priority ranking in the bail-in process. Exploiting the staggered transposition of the bail-in provisions into national law across member states, I find that banks experience a decrease in risk-taking subsequent to bail-in implementation. Collectively, these findings suggest that bail-in provisions lead to risk-reduction and mitigate shareholder-creditor conflicts. Further analyses show that banks are more likely to serve as lead arrangers, require collateral, and shift loan portfolio concentration to borrowers with prior lending relationships and lower growth opportunities.

Bibliographic Note

Information for this record is supplemented by the author(s) concerned.

Citation Format(s)

Economic Consequences of Mandatory Bail-in. / Chen, Yi-Chun.

2019. Paper presented at 103rd American Accounting Association Annual Meeting, AAA 2019, San Francisco , United States.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review