economically significant. We conclude that the CoCo bonds issued so far can create perverse incentives for banks' equity holders. …

explain up to 90% of this difference. Banks' assets consist of a diversified portfolio of non-bank debt. Therefore, banks have …Banks have much more leverage than non-banks. This paper uses a joint sample of banks and non-banks between 1965 and … a much lower asset risk than non-banks. Since asset risk is a major determinant of capital structure choice, this single …