2001 Fiscal Year Final Research Report Summary
An Economic Analysis of Wealth Transfers among Claimholders of Distressed Financial Institutions: An Application of Option Pricing Model
| Project/Area Number |
12630106
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Yokohama City University |
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Principal Investigator |
MARUYAMA Hiroshi Yokohama City University, Department of Economics and Business Administration, Professor, 商学部, 教授 (30181837)
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| Project Period (FY) |
2000 – 2001
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| Keywords | convertible preferred stock / conversion price / minimum price of conversion / capital infusion / option pricing model / stock volatility |
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| Research Abstract |
On March, 1999, 24 banks were notified that the application of issuance of preferred stocks and other securities and Plan for Restoring Sound Management (the "Revitalization Plan" ) were approved. We investigate this publicly funded preferred stock capital injections under the Early Strengthening Law. Using an option pricing model, fair value of the convertible preferred stock issued by a bank was estimated. Results indicate that the estimated market value of the preferred stock suffered significant losses. This suggests that the existence of potential wealth transfers to the common stockholders from the preferred stockholders, I. e. taxpayers.
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