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Governance and optimal financing for asset‐backed securitization

Gang‐Zhi Fan (Department of Real Estate, National University of Singapore, Singapore)
Tien Foo Sing (Department of Real Estate, ational University of Singapore, Singapore)
Seow Eng Ong (Department of Real Estate, National University of Singapore, Singapore)
C.F. Sirmans (School of Business, University of Connecticut, Storrs, Connecticut, USA)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 1 October 2004



Asset‐backed securitization (ABS) is an interesting financial innovation whereby debt instruments backed by cash flows generated from income‐producing assets are issued for investment purposes in the capital markets. This study examines the characteristics of ABS transactions in Singapore and evaluates whether proper governance mechanisms have been developed to protect ABS investors. We examined the unique features of the Visor case, such as rental guarantee, large block ownerships of junior bonds, credit enhancement, embedded options, managerial relationships between the SPV and servicers, and critically evaluated the effects of these characteristics on the governance of ABS. Rules on separation of banks' participation in ABS and the accountant's requirement of “clean sale” that affect the ABS structure were also discussed. We also develop a simple information asymmetric model to evaluate the pecking order choice of two different financing methods: collateralized loans and ABS.



Fan, G., Foo Sing, T., Eng Ong, S. and Sirmans, C.F. (2004), "Governance and optimal financing for asset‐backed securitization", Journal of Property Investment & Finance, Vol. 22 No. 5, pp. 414-434.



Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited

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