Since 2014
Valuing guaranteed bank debt: The roles of the strength and size of the bank and the guarantor
Journal of Economic & Financial Studies
View Archive Info| Field | Value | |
| Title |
Valuing guaranteed bank debt: The roles of the strength and size of the bank and the guarantor
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| Creator |
Estrellaa, Arturo
Schichb, Sebastian |
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| Subject |
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Contingent claims analysis; Implicit guarantees; Risky guarantors; Too-big-to-fail. E44, G13, G21, G28, H81. |
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| Description |
A contingent claims model of the value of sovereign guarantees of bank debt shows that the value decreases with the bank’s own creditworthiness and it increases with that of the sovereign as well as with bank and sovereign size. Using cross-sectional data for 188 large banks world-wide from 2007 to 2013, empirical results are consistent with the model’s implications, suggesting that the implicit support for a bank is higher when the bank is larger, when the bank is weaker, and when the country in which the bank is headquartered is larger or more creditworthy. While bank-specific factors matter as well as those related to the sovereign of the country where the bank is located, the effect on the value of sovereign guarantees of changes in bank strength dominate those in sovereign strength.
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| Publisher |
LAR Center Press
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| Contributor |
—
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| Date |
2015-09-05
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
http://journalofeconomics.org/index.php/site/article/view/165
10.18533/jefs.v3i05.165 |
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| Source |
Journal of Economic & Financial Studies; Vol 3, No 05 (2015): October; 19-32
2379-9471 2379-9463 |
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| Language |
eng
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| Relation |
http://journalofeconomics.org/index.php/site/article/view/165/112
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| Rights |
Copyright (c) 2015 Arturo Estrellaa, Sebastian Schichb
http://creativecommons.org/licenses/by-nc/4.0 |
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