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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Regulation and the Cost of Capital in Japan: A Case Study
John Ammer; Michael S. Gibson
1996-556  (August 1997)

Abstract:  Over the last several years, a combination of loan losses and regulatory barriers to equity issuance have left Japanese banks starved for capital. In September 1995, the Mitsubishi Bank was permitted to issue a complicated convertible security in a foreign market. The results of simulations of the price path of the underlying equity imply that Mitsubishi Bank's annualized risk-adjusted cost of capital through this instrument was between 80 and 310 basis points higher than if the bank had instead been able to issue common stock at its current price.

Full paper (80 KB PDF)

Keywords
convertible bond, Japanese banks, financial regulation, underpricing

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Last update: May 29, 2002