Do bond yields follow the hierarchy of risk post BRRD?

Cucinelli, Doriana; Gai, Lorenzo; Ielasi, Federica

doi:10.1111/eufm.12280

Cited by 4 publications

(4 citation statements)

References 43 publications

(83 reference statements)

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“…Some studies corroborate the abovementioned results as regards senior unsecured debt, Lewrick et al (2019) find indeed evidence of enhanced market discipline among senior unsecured bondholders, whereas Cucinelli et al (2020) support findings about their higher bail-in expectations. Finally, Gai et al (2020) find an increase in the risk-premium for unsecured bonds, pointing out senior unsecured bonds as those showing the greatest effect on yields and yield spread.…”

Section: Literature Reviewmentioning

confidence: 63%

“…Some studies corroborate the abovementioned results as regards senior unsecured debt, Lewrick et al. (2019) find indeed evidence of enhanced market discipline among senior unsecured bondholders, whereas Cucinelli et al. (2020) support findings about their higher bail-in expectations.…”

Section: Literature Reviewmentioning

confidence: 63%

“…For each bank, we thus create a portfolio of bailinable and non-bailinable bonds expressive of the mean of the yield to maturity of all respective bonds. We, then, compute the yield spread between the bailinable and non-bailnable portfolios, which is regarded by literature as a reliable measure of bail-in credibility (Crespi et al, 2019;Giuliana, 2019;Cucinelli et al, 2020). Finally, we employ a fixed effects panel data regression to compare the yield spread between the two groups of emerging countries with a framework for the bail-in and not.…”

Section: Introductionmentioning

confidence: 99%

“…Being fundamental for its implementation, bail-in credibility has piqued the interest of numerous scholars that have addressed the question mostly focusing on the shortcomings of its implementation in the European bank resolution framework (Giuliana, 2019; Crespi et al. , 2019; Pablos, 2019; Cucinelli et al. , 2020; Gai et al.…”

Section: Introductionmentioning

confidence: 99%

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Bail-in credibility: evidence from emerging markets

Velliscig

Piserà²,

Polato³

et al. 2022

IJOEM

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PurposeSome controversial cases of bail-in in the emerging countries have raised the question about whether for those countries to have in place a regulation for the bail-in is appropriate or not. To assess appropriateness, this paper investigates bail-in credibility among investors, as crucial condition for the credibility’s smooth implementation, by measuring the yield spread between bailinable and non-bailinable bonds.Design/methodology/approachThe authors compare the yield spread of banks located in emerging countries that have in place a framework for the bail-in to the comparable yield spread measured for banks located in emerging countries without such framework. The comparison permits to detect whether there is a significant difference between the two spreads, which would suggest that bail-in regulation has been deemed credible by market participants where enforced, or not, which in this case would signal a problem of credibility.FindingsThe authors' results point out a significantly higher yield spread for banks located in emerging countries that have adopted a framework for the bail-in of creditors. Bail-in regulation has, therefore, being deemed credible in the adopting emerging countries, thus ensuring a crucial condition for bail-in regulation's smooth application. The authors also point out bank size and country's gross domestic product (GDP) growth as crucial moderators of bail-in expectations of market participants that can guide the implementation of bail-in rules in emerging countries.Originality/valueThis paper contributes to the literature on the credibility of bail-in with a new perspective from the emerging countries.

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Section: Literature Reviewmentioning

confidence: 63%

Section: Literature Reviewmentioning

confidence: 63%