Refinancing and shareholder value: covered bond issuances

Refinancing and shareholder value: covered bond issuances
between 2007 and 2010
Jérémy Morvan1
Christian Cadiou
Nathalie Cotillard
Laboratoire ICI (EA2652)
IAE de Bretagne Occidentale
Jean Moussavou
Laboratoire ICI (EA2652)
ESC Bretagne Brest
Abstract
This paper deals with an event study assessing the influence of covered
bond issuance on European banks’ share prices. Covered bonds are debt
securities backed by mortgages. In contrast to CDOs, mortgages remain on
the issuer’s consolidated balance sheet. We show that covered bond
issuances have a positive influence on issuers’ share prices with a three
days’ delay. So, the stock market reacts not to the issuance announcement
but to the success of the issuance.
Keywords: covered bonds, issuance, event study, subprime mortgage crisis
1
Contact: [email protected], laboratoire ICI (EA2652), 12 rue de Kergoat, CS93837, 29238 Brest
cedex