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Nonlinear effect of subordinated debt changes on bank performance

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  • Ryu, Doojin
  • Yu, Jinyoung

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.

Suggested Citation

  • Ryu, Doojin & Yu, Jinyoung, 2021. "Nonlinear effect of subordinated debt changes on bank performance," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612320301112
    DOI: 10.1016/j.frl.2020.101496
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    1. Lepetit, Laetitia & Strobel, Frank, 2015. "Bank insolvency risk and Z-score measures: A refinement," Finance Research Letters, Elsevier, vol. 13(C), pages 214-224.
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    Cited by:

    1. Ryu, Doojin & Webb, Robert I. & Yu, Jinyoung, 2022. "Funding liquidity shocks and market liquidity providers," Finance Research Letters, Elsevier, vol. 47(PB).
    2. S. M. Shamsul Alam & Mohammad Abdul Matin Chowdhury & Dzuljastri Bin Abdul Razak, 2021. "Research evolution in banking performance: a bibliometric analysis," Future Business Journal, Springer, vol. 7(1), pages 1-19, December.

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    More about this item

    Keywords

    Bank performance; Debt issuances; Debt redemptions; Nonlinearity; Panel data regression; Subordinated debt;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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