Refi nancing and Shareholder Value: Covered Bond Issuances between 2007 and 2010

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 successful 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.
JEL codes: G010, G140