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A reconsideration of the risk sensitivity of U.S. banking organization subordinated debt spreads: a sample selection approach

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Abstract

The authors estimate a sample selection model over three distinct regulatory \\"regimes\\" when the treatment of bank bondholders (in the event of bank failures) differed substantially. They then estimate their selection model to test the strength of bond market discipline over these three regulatory regimes, finding that bank bond spreads are positively associated with bank risk measures during all three regimes, even during the too-big-to-fail period.

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  • Daniel M. Covitz & Diana Hancock & Myron L. Kwast, 2004. "A reconsideration of the risk sensitivity of U.S. banking organization subordinated debt spreads: a sample selection approach," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 73-92.
    • Handle: RePEc:fip:fednep:y:2004:i:sep:p:73-92:n:v.10no.2
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