Nonlinear effect of subordinated debt changes on bank performance

Doojin Ryu; Jinyoung Yu

doi:10.1016/j.frl.2020.101496

Nonlinear effect of subordinated debt changes on bank performance

Doojin Ryu^*, Jinyoung Yu

^*Corresponding author for this work

Sungkyunkwan University

Research output: Contribution to journal › Article › peer-review

11 Citations (Scopus)

Abstract

We investigate whether changes in subordinated debt have a nonlinear effect on bank performance. Subordinated debt changes negatively affect bank performance, both linearly and quadratically. Increases in subordinated debt, namely, issuances, deteriorate (increase) bank profitability (insolvency risk), while the effects of the debt decreases, namely, redemptions, are insignificant.

Original language	English
Article number	101496
Journal	Finance Research Letters
Volume	38
DOIs	https://doi.org/10.1016/j.frl.2020.101496
Publication status	Published - Jan 2021
Externally published	Yes

Keywords

Bank performance
Debt issuances
Debt redemptions
Nonlinearity
Panel data regression
Subordinated debt

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10.1016/j.frl.2020.101496

Cite this

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abstract = "We investigate whether changes in subordinated debt have a nonlinear effect on bank performance. Subordinated debt changes negatively affect bank performance, both linearly and quadratically. Increases in subordinated debt, namely, issuances, deteriorate (increase) bank profitability (insolvency risk), while the effects of the debt decreases, namely, redemptions, are insignificant.",

keywords = "Bank performance, Debt issuances, Debt redemptions, Nonlinearity, Panel data regression, Subordinated debt",

author = "Doojin Ryu and Jinyoung Yu",

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AB - We investigate whether changes in subordinated debt have a nonlinear effect on bank performance. Subordinated debt changes negatively affect bank performance, both linearly and quadratically. Increases in subordinated debt, namely, issuances, deteriorate (increase) bank profitability (insolvency risk), while the effects of the debt decreases, namely, redemptions, are insignificant.

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KW - Debt issuances

KW - Debt redemptions

KW - Nonlinearity

KW - Panel data regression

KW - Subordinated debt

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Nonlinear effect of subordinated debt changes on bank performance

Abstract

Keywords

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