Bank Bonds: Size, Systemic Relevance and the Sovereign

Bail‐in rules and the pricing of Italian bank bonds

“…In contrast, after 2015 they face, ceteris paribus, an increase in the cost of funding. Eventually, the implementation of the new Directive might have mitigated the too-big-too-fail effect, which is consistent with the findings of, among others, Zaghini (2014).…”

“…2003). The maturity, at least theoretically, should be positively correlated with our dependent variable, as higher yields should be offered to bonds with longer redemption horizons (Zaghini, 2014). Furthermore, we expect listed bonds to be cheaper for banks with respect to non-listed ones because the access to capital markets should guarantee a liquid investment to the investor.…”

“…Since our goal is to study the impact that the adoption of the BRRD has generated on the cost of funding borne by the banks when issuing bonds, we refer exclusively to the returns offered in the primary market − following the approach used, among others, by Morgan and Stiroh (2000) and Sironi (2003). Indeed, as pointed out by Zaghini (2014), the fluctuations of the returns observed in the secondary market do not influence the cost of funding for the issuing banks. Moreover, for many securities included in our sample, the secondary market is non-existent.…”

“…Indeed, by issuing larger amounts of bonds, banks can benefit from a decrease in the cost of funding due to better economies of scale. In addition, greater issues are usually offered by larger banks that can more easily target a broader share of least bargaining retail investors, given their wider distribution network (Sironi,14 We utilize banks' balance sheets data related to the year preceding the issuance of the bond as that is the most recent public information available, to investors, at the issuing date (as in Zaghini, 2014). In other words, the data from banks' statements in year t−1 is utilized to generate our BANK VAR(s) that are matched to the BOND VAR(s) related to bonds issued in year t.…”

Fragmentation and heterogeneity in the euro-area corporate bond market: Back to normal?

“…In particular, we follow the methodology used in the early contributions by Morgan and Stiroh (2001) and Sironi (2003), which has been recently applied to the bond issuance of financial corporations by Santos (2014) and Zaghini (2014).…”