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Regulation and the cost of capital in Japan: a case study

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Abstract

Over the last several years, a combination of loan losses and regulatory barriers to equity issuance have left Japanese banks starved for capital. In September 1995, the Mitsubishi Bank was permitted to issue a complicated convertible security in a foreign market. The results of simulations of the price path of the underlying equity imply that Mitsubishi Bank's annualized risk-adjusted cost of capital through this instrument was between 80 and 310 basis points higher than if the bank had instead been able to issue common stock at its current price.

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  • John Ammer & Michael S. Gibson, 1996. "Regulation and the cost of capital in Japan: a case study," International Finance Discussion Papers 556, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:556
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    References listed on IDEAS

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    4. Brennan, M J & Schwartz, Eduardo S, 1977. "Convertible Bonds: Valuation and Optimal Strategies for Call and Conversion," Journal of Finance, American Finance Association, vol. 32(5), pages 1699-1715, December.
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    6. Dann, Larry Y. & Mikkelson, Wayne H., 1984. "Convertible debt issuance, capital structure change and financing-related information : Some new evidence," Journal of Financial Economics, Elsevier, vol. 13(2), pages 157-186, June.
    7. Jun-Koo, Kang & Lee, Yul W., 1996. "The pricing of convertible debt offerings," Journal of Financial Economics, Elsevier, vol. 41(2), pages 231-248, June.
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    Cited by:

    1. Hesna Genay, 1998. "Assessing the condition of Japanese banks: how informative are accounting earnings?," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 22(Q IV), pages 12-34.

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    Keywords

    Capital; Japan;

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