Switching to contingent capital financing could reinforce rather than dampen risk incentives, and these distorted risk incentives are a drawback of contingent capital issuances.
Source quote, verbatim
In effect, switching to CCS financing could reinforce risk in- centives and these distorted risk incentives could create draw- backs for CCS issuances.
From
Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012), IV.A. Adverse Effects, p. 34 https://ssrn.com/abstract=1998455 · source PDF
Cite as
Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455
Holds when
where the issuing institution is already treated as too big to fail
the author notes these drawbacks are unlikely to materialize in the near term given the nascent market
restateskaal:claim:1908473-015 Switching to contingent capital financing may reinforce rather than reduce risk incentives, and whether the ri...
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