Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/288237 
Authors: 
Year of Publication: 
2022
Citation: 
[Journal:] European Financial Management [ISSN:] 1468-036X [Volume:] 29 [Issue:] 5 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2022 [Pages:] 1401-1440
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
This paper tests the ‘Too‐Big‐to‐Fail’ hypothesis that whether being designated as a global systemically important bank (G‐SIB) has an impact on the credit default swap (CDS) price of the bank, thereby reducing its credit risk. We find surprising evidence that the CDS spreads of a bank increase (decrease) after the announcement of a higher (lower) capital surcharge. However, this effect is temporary, as the mean CDS spreads revert to preannouncement level, dropping sharply after the initial rise. These findings create a puzzle by implying that a higher capital surcharge requirement and more stringent regulation could outweigh the implicit subsidy advantages of being too‐big‐to‐fail.
Subjects: 
CDS spreads
G‐SIB capital surcharges
G‐SIBs
systemically important banks
too‐big‐to‐fail
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
Document Version: 
Published Version

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