Associate Professor Xin Xia, a Researcher of the Base, has had his collaborative paper "Optimal conversion ratio of contingent capital under issuance constraints" published online in the important academic journal International Review of Financial Analysis(IRFA).

IRFA is a renowned SSCI journal in the field of international finance, holding JCR Q1, ABS 3 Star, and CAS Economics Tier 1 TOP Journal (2023) rankings. It has an Impact Factor (IF) of 8.2 and is ranked 4th out of 111 journals in the business finance category. The journal aims to publish high-quality theoretical and empirical papers in the fields of finance and accounting. 

Abstract: We develop a model of banking to clarify how contingent convertible bonds (CoCos) affect banks’ financing and investment policies when they face the upper limit of CoCo issuance. We then discuss the optimal conversion ratio of CoCos. In contrast to the frictionless setting, banks with more dilutive terms optimally choose to delay investment and issue first larger and then smaller CoCos. For banks with a weak (strong) issuance constraint, given high (low) asset volatility or low (high) deposit account service income, mandatory conversion to equity CoCos (permanent full write–down CoCos) are preferred. These findings may provide an explanation for why these two types of CoCos prevail in the market.

Keywords: CoCos；Issuance constraints；Investment；Financing

Link: https://doi.org/10.1016/j.irfa.2025.103963

Teacher profile

Xin Xia is a Lecturer at the School of Finance, Zhongnan University of Economics and Law, with a primary research focus on corporate finance. Over the past few years, he has published more than 10 papers as the first author or sole corresponding author in academic journals including Journal of Management Sciences, Chinese Journal of Management Science, Journal of Corporate Finance, International Review of Economics and Finance, North American Journal of Economics and Finance, Economic Modelling, Applied Economics, and Economics Letters. He also serves as a reviewer for several SSCI journals. His research achievements have been funded by the Contemporary Economics Doctoral Innovation Program.