The impact of bank solvency on the decision to issue CoCos. A logit random effects model
| Dependent variable: AT1 CoCos | (1) | (2) | (3) | (4) |
|---|---|---|---|---|
| Independent variables | ||||
| Tier 1t−1 | −11.535*** (3.883) | −9.11** (4.595) | ||
| CET1t−1 | −8.502** (3.629) | −11.713** (4.759) | ||
| Control variables | ||||
| Net Loanst−1 | 0.189 (0.777) | −0.742 (0.789) | 1.064 (0.74) | −0.669 (0.8) |
| ROAAt−1 | 27.134 (22.781) | 17.971 (25.705) | 50.438** (22.88) | 20.162 (27.064) |
| RWAst−1 | −3.372*** (1.092) | 0.98 (1.157) | 0.089 (1.092) | 0.786 (1.227) |
| Total Assetst−1 | 0.695*** (0.112) | 0.559*** (0.1) | 0.685*** (0.114) | |
| _cons | −4.725*** (1.429) | −14.322*** (2.383) | −8.579*** (1.664) | −9.28*** (1.939) |
| /lnsig2u | 1.359*** (0.218) | 0.559** (0.269) | 0.78*** (0.262) | 0.515* (0.286) |
| AIC | 879.285 | 816.374 | 815.805 | 792.972 |
| BIC | 934.368 | 962.551 | 881.890 | 929.869 |
| Observations | 2,115 | 2,043 | 1,821 | 1,765 |
| Time Fixed Effect | Yes | Yes | Yes | Yes |
| Country Fixed Effect | No | Yes | No | Yes |
| Dependent variable: AT1 CoCos | (1) | (2) | (3) | (4) |
|---|---|---|---|---|
| Independent variables | ||||
| Tier 1t−1 | −11.535 | −9.11 | ||
| CET1t−1 | −8.502 | −11.713 | ||
| Control variables | ||||
| Net Loanst−1 | 0.189 (0.777) | −0.742 (0.789) | 1.064 (0.74) | −0.669 (0.8) |
| ROAAt−1 | 27.134 (22.781) | 17.971 (25.705) | 50.438 | 20.162 (27.064) |
| RWAst−1 | −3.372 | 0.98 (1.157) | 0.089 (1.092) | 0.786 (1.227) |
| Total Assetst−1 | 0.695 | 0.559 | 0.685 | |
| _cons | −4.725 | −14.322 | −8.579 | −9.28 |
| /lnsig2u | 1.359 | 0.559 | 0.78 | 0.515 |
| AIC | 879.285 | 816.374 | 815.805 | 792.972 |
| BIC | 934.368 | 962.551 | 881.890 | 929.869 |
| Observations | 2,115 | 2,043 | 1,821 | 1,765 |
| Time Fixed Effect | Yes | Yes | Yes | Yes |
| Country Fixed Effect | No | Yes | No | Yes |
Notes:
Cluster-robust standard errors are in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1.
This table reports the results of the random effects logistic regression explaining the issuance of the AT1CoCos and bank solvency in Europe between 2011 and 2018. The dependent variable is a dummy which is equal to 1 when a bank issue CoCo in a given year and 0 otherwise. The variables of interest are the ratio of total Tier 1 capital to risk-weighted assets (RWA) and the ratio of bank Common Equity Tier 1 (CET1) to RWA. Control variables are the proportion of bank net loans to its total assets, the return on average assets (ROAA), RWA to total assets and the natural logarithm of bank total assets. All explanatory variables are winsorized at the 1st and 99th percentile and are lagged one year. Standard errors are clustered at the bank level
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