On the propensity to issue contingent convertible (CoCo) bonds

In this paper, we analyze the determinants of CoCo bond issuance. We find evidence that banks that issue CoCos are typically large. Moreover, in the case of BRICS and other emerging economies, we find evidence that banks are also highly leveraged, aiming to meet the Basel III rules and replace debt with equity funding. Also, we study the strength of the regulatory component in the CoCo issuance through analysis of tax deductibility in the UK, countercyclical capital buffer, subsamples of global systemically important banks and Basel III implementation.