Abstract
In the aftermath of the Global Financial Crisis, regulators encouraged banks to issue contingent convertible bonds ("CoCos") to improve the issuing bank's stability. Banks around the world have issued more than $1 trillion worth of CoCos to date. Yet it is unclear whether CoCos have achieved their intended goal of improving stability. Leveraging the unexpected banking panic in March 2023, we show that issuing banks fared worse-as measured by abnormal equity returns and probabilities of default. We also examine market dynamics after 2023 and find that the largest banks have continued to issue CoCos with similar contractual terms, though issuer characteristics are changing.
Disciplines
Banking and Finance Law | Law and Economics
Date of this Version
11-19-2025
Working Paper Citation
Choi, Albert H.; Gerszten, Jacob; and Zhang, Jeffery Y., "Limits of Contingent Convertible Bonds: Evidence from the Credit Suisse Collapse" (2025). Law & Economics Working Papers. 305.
https://repository.law.umich.edu/law_econ_current/305