Sclip, Alex and Girardone, Claudia and Miani, Stefano (2019) Large EU banks' capital and liquidity: Relationship and impact on credit default swap spreads. British Accounting Review, 51 (4). pp. 438-461. DOI https://doi.org/10.1016/j.bar.2018.10.001
Sclip, Alex and Girardone, Claudia and Miani, Stefano (2019) Large EU banks' capital and liquidity: Relationship and impact on credit default swap spreads. British Accounting Review, 51 (4). pp. 438-461. DOI https://doi.org/10.1016/j.bar.2018.10.001
Sclip, Alex and Girardone, Claudia and Miani, Stefano (2019) Large EU banks' capital and liquidity: Relationship and impact on credit default swap spreads. British Accounting Review, 51 (4). pp. 438-461. DOI https://doi.org/10.1016/j.bar.2018.10.001
Abstract
This paper explores the interrelations between bank capital and liquidity and their impact on the market probability of default. We employ an unbalanced panel of large European banks with listed credit default swap (CDS) contracts during the period 2005-2015, which allow us to consider the impact of the recent financial crisis. Our evidence suggests that bank capital and funding liquidity risk as defined in Basel III have an economically meaningful bidirectional relationship. However, the effect on CDS spread is ambiguous. While capital appears to have a relatively large impact on CDS spread changes, liquidity risk is priced only when it falls below the regulatory threshold.
Item Type: | Article |
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Uncontrolled Keywords: | EU Banks; Capital; Liquidity; Credit Default Swaps (CDS); Financial Crisis. |
Subjects: | H Social Sciences > HG Finance |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 09 Oct 2018 10:50 |
Last Modified: | 30 Oct 2024 16:28 |
URI: | http://repository.essex.ac.uk/id/eprint/23216 |
Available files
Filename: Sclip et al BAR-accepted version.pdf
Licence: Creative Commons: Attribution-Noncommercial-No Derivative Works 3.0