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1 – 10 of over 2000
Article
Publication date: 6 November 2009

Ming Fang and Fenjie Long

Asset‐backed securitization (ABS), which was brought into China in 2005 and followed by a rapid expansion, is an important financial instrument for real estate industry. The…

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Abstract

Purpose

Asset‐backed securitization (ABS), which was brought into China in 2005 and followed by a rapid expansion, is an important financial instrument for real estate industry. The purpose of this empirical study is to assess the effects of asset securitization on stock market and equity holders' wealth by examining stock price changes upon securitization transactions in China from 2005 to September 2008.

Design/methodology/approach

Event study is implemented to test the wealth effects of ABS on shareholders. First, normal stock returns of companies with ABS issuance during the studied period are introduced by running the market model regression; excess returns to stockholders at the time that the securitization became public knowledge are then examined; finally, significance of the excess returns are tested and influencing factors including firm and transaction characteristics are discussed.

Findings

This paper finds that securitization generally does not have significant impact on wealth of stockholders; a considerable number of securitizations are even wealth destroying. The paper interprets these findings to mean that securitization is usually a negative signal to the stock market for first‐time securitizers, but indifferent or positive for frequent securitizers. Additionally, wealth effect of securitization on stockholders also largely depends on its underlying assets.

Originality/value

The outcome of this paper will assist companies, banks, and governments in understanding the effects of asset securitization, thus maximizing gains from securitization and enacting suitable polices and regulations. The paper suggests that companies and governments should examine market conditions and promote securitization only when the market is calm. Additionally, first‐time issuers of asset securitization should be cautious of possible losses caused by signs of the firm's insufficient funding, while subsequent issuance can be regarded as a relatively safe financial instrument.

Details

Journal of Financial Management of Property and Construction, vol. 14 no. 3
Type: Research Article
ISSN: 1366-4387

Keywords

Article
Publication date: 9 January 2007

Hatice Uzun and Elizabeth Webb

This paper aims to offer a comprehensive comparison of the characteristics between banks that securitize and banks that do not and to provide evidence of the capital arbitrage…

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Abstract

Purpose

This paper aims to offer a comprehensive comparison of the characteristics between banks that securitize and banks that do not and to provide evidence of the capital arbitrage theory of securitization.

Design/methodology/approach

First, the fundamental financial similarities and differences between banks that securitize assets and banks that do not participate in the securitization market are tested. Second, variables that help predict whether a bank securitizes assets are analyzed. Third, the determinants of securitization extent in banks that securitize assets are investigated – for general securitization extent and for specific type of asset securitized. Using a sample of 112 banks that securitize different assets, a matched sample of banks that do not securitize based on entity type and size is created. A quarterly panel data set of these banks dating back to 2001 is used.

Findings

The results indicate that bank size is a significant determinant of whether a bank securitizes. Further, overall securitization extent is negatively related to the bank's capital ratio (in support of capital arbitrage theory), but this result is primarily driven by credit card securitization.

Originality/value

Utilizing a unique data set of quarterly data from bank Call Reports; the panel data set is large relative to past studies. A matched sample approach was used to test fundamental financial similarities and differences between securitizing and non‐securitizing banks. In addition to aggregated securitization, an examination was made of how different classes of assets affect the banks' risk‐based capital ratios and test the capital arbitrage theory of securitization.

Details

The Journal of Risk Finance, vol. 8 no. 1
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 8 April 2021

Christian Parker, Arun Srivastava, Paul Severs and Cameron Saylor

To highlight that the risk retention rules associated with the holding of securitization investments, commonly thought to apply only to the sponsors and manufacturers of…

Abstract

Purpose

To highlight that the risk retention rules associated with the holding of securitization investments, commonly thought to apply only to the sponsors and manufacturers of securitisations, also affect EU institutional investors and potentially impact non-EU fund managers that invest in these assets.

Design/methodology/approach

To address which classes of investor are affected and then to provide an overview of the obligations on affected investors that do invest in securitization investments.

Findings

There is much that is straightforward about the relevant obligations but there are a number of quirks that have not necessarily been fully appreciated by the market: these include the applicability to investors on a “look through” basis that may, inter alia, affect US credit fund managers with EU institutional investors.

Practical implications

EU institutional investors that do invest in this asset class should be considering the need to take practical steps to prepare written due diligence materials; non-EU credit managers that run e.g. ABS funds offered into the EU or in which there may be EU institutional investors should consider if they may have any obligations under the EU Securitization Regulation.

Originality/value

The aspects of the Securitization Regulation that affect institutional investors and regular fund managers have not been addressed as thoroughly as they have by the main securitization sector (banks, CLO managers and similar). This article seeks to remedy that and should prove of value to compliance, legal and other professionals at those types of institution.

Details

Journal of Investment Compliance, vol. 22 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

Book part
Publication date: 7 August 2019

Antonios Kaniadakis and Amany Elbanna

In the aftermath of the global financial crisis, transparency became a rhetorical token used to provide a solution to financial problems. This study examines how transparency…

Abstract

In the aftermath of the global financial crisis, transparency became a rhetorical token used to provide a solution to financial problems. This study examines how transparency materialized in the context of the European securitization industry, which was largely blamed for the credit crunch. The authors show that although transparency was broadly associated with a political call for financial system reform, in the European securitization industry it provided the basis on which to repurpose its market infrastructure. The authors introduce the concept of transparency work to show that transparency is a market achievement organized as a standardization network of heterogeneous actors aiming at establishing a new calculative infrastructure for managing credit risk. Combining insights from information infrastructure research and Economic Sociology, the authors contribute to a distributed and networked understanding of information infrastructure development.

Book part
Publication date: 12 September 2022

Zhizhen Chen, Frank Hong Liu, Jin Peng, Haofei Zhang and Mingming Zhou

We examine whether loan securitization has an impact on bank efficiency. Using a sample of large US commercial banks from 2002 to 2012, we find that bank loan securitization has a…

Abstract

We examine whether loan securitization has an impact on bank efficiency. Using a sample of large US commercial banks from 2002 to 2012, we find that bank loan securitization has a significant and positive impact on bank efficiency, and this relationship is stronger for banks with higher capital ratios, higher default risk, and lower level of liquidity and diversification. Our results are robust to Heckman self-selection correction and difference-in-difference (DID) analysis. In addition, these results are found mainly in non-mortgage loan securitizations but not in mortgage loan securitizations. Finally, we show that loan sales also have a positive impact on bank efficiency.

Article
Publication date: 23 May 2008

Roza Hazli Zakaria and Abdul Ghafar Ismail

The purpose of this paper is to validate the concern that banks' increasing involvement in securitization activity restrains banks' lending, as well as their degree of risk…

1678

Abstract

Purpose

The purpose of this paper is to validate the concern that banks' increasing involvement in securitization activity restrains banks' lending, as well as their degree of risk tolerance. Theoretical frameworks claim that securitization reduces risk, hence decreasing banks' degree of risk aversion. Subsequently, banks would be motivated to increase their percentage of assets devoted to risky activities, which is lending to economic sectors. However, banking statistics dictates that banks' lending is on the decline while banks' securitization activities are on the rise.

Design/methodology/approach

The paper refers specifically to the Malaysian Islamic commercial banks and utilizes standard panel data analysis.

Findings

Supportive evidence was found that banks' involvement in securitization activity do restrain their lending activity. In addition, banks tend to have a riskier portfolio composition following their involvement in securitization activity. Taken together, this signals that banks' involvement in securitization activity needs to be regulated or restricted since excessive securitization activities could curtail credit and increase risk inherent in banks' lending portfolio.

Originality/value

This study departs from previous literature in the sense that an alternative method is introduced to measure banks' securitization activity.

Details

Humanomics, vol. 24 no. 2
Type: Research Article
ISSN: 0828-8666

Keywords

Article
Publication date: 9 November 2018

Haiping Wang and Jing Zhang

The purpose of this paper is to establish a direct link between securitizations and accrual-based earnings management by investigating whether financial statements in the periods…

Abstract

Purpose

The purpose of this paper is to establish a direct link between securitizations and accrual-based earnings management by investigating whether financial statements in the periods of securitizations are more likely to be restated at a later time. In addition, this study examines whether the association between securitization and accounting restatements is more pronounced in the pre-financial crisis period and for banks with less independent or industry-specialized auditors.

Design/methodology/approach

This study covers a sample of bank holding companies with restatement information between 2001 and 2012. Using the incidence of material accounting restatements as a proxy for accrual earnings management, this study investigates whether securitizations are likely used as a tool for accrual earnings management. A logistic model is applied with standard errors clustered at the firm-year level. Various robustness tests are conducted to rule out the possibilities that the results are driven by unintentional reporting errors or endogeneity of the securitization decisions.

Findings

The empirical results reveal a positive and significant association between banks’ securitization activities and the likelihood of having accounting restatements. Moreover, this positive association is more pronounced in the pre-financial crisis period and for banks with less independent or industry-specialized auditors.

Research limitations/implications

The findings suggest that managers take advantage of discretions on accounting rules for securitizations to manage earnings. This evidence provides multi-dimension implications for standard setters and practitioners, as well as investors.

Originality/value

This is one of the very first papers to document evidence that accrual earnings management is involved in securitization.

Details

Asian Review of Accounting, vol. 26 no. 4
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 12 June 2017

Jaume Roig Hernando

The purpose of this paper is to analyze the securitization of rental streams, a new investment and finance product introduced in the USA in 2013 that enables fundraising from…

Abstract

Purpose

The purpose of this paper is to analyze the securitization of rental streams, a new investment and finance product introduced in the USA in 2013 that enables fundraising from large residential portfolios owned by major investment funds and investment banking. The securities are made up of non-performance loans as well as real estate portfolios of financial entities.

Design/methodology/approach

An academic analysis of the European securitization market is performed, as well as a broad overview of the state of the art of the rental housing market and investment property market. Moreover, a market study of Real Estate Owned (hereinafter, REOs) and Real Estate Debts is carried out to determine both the present framework and future trends. Various financial entities and real estate management companies are examined through interviews and data collection to assess the reality of distressed assets and residential portfolios owned by major investors. It introduced the Broker’s Price Opinion concept, de loan-to-value concept and the London Interbank Offered Rate.

Findings

REO-to-rental securitization is a step forward toward the democratization of finance through the globalization of the residential market, improving risk sharing for major and retail investors. The securitization of rental streams in Europe has not taken off, despite several issuances in the USA since 2013 with significant success where first tranches obtained a credit qualification of triple-A from the majority of the main rating agencies.

Originality/value

At the end of 2013, a global investment firm launched an innovative finance and investment vehicle that securitized the cash flows originating from leased residential properties. That issue resulted in considerable success and in the development of a new alternative and innovative financing source for real estate activity. Taking into account that housing is a primary need of our society, there is a strong motivation for improving the residential market, and thus, REO-to-rental securitization could help take a step forward in making the housing market more efficient.

Details

International Journal of Housing Markets and Analysis, vol. 10 no. 4
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 13 June 2016

Alper Kara, Aydin Ozkan and Yener Altunbas

Bank securitisation is deemed to have been a major contributing factor to the 2007/2008 financial crises via fuelling credit growth accompanied by lower banks’ credit standards…

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Abstract

Purpose

Bank securitisation is deemed to have been a major contributing factor to the 2007/2008 financial crises via fuelling credit growth accompanied by lower banks’ credit standards. Yet, prior to the crisis a common view was that securitisation activity makes the financial system more stable as risk was more easily diversified, managed and allocated economy-wide. The purpose of this paper is to review the extant literature to explore the so far generated knowledge on the impact of securitisation on banking risks. In particular, the authors examine the theoretical arguments and empirical studies on securitisation and banking risks before and after the global financial crisis of 2007/2008.

Design/methodology/approach

Review and discussion of the literature.

Findings

Theoretical literature univocally accentuate the undesirable consequences of securitisation, which may promote retention of riskier loans, undermine banks’ screening and monitoring incentives and enhance banks’ risk appetite. However, empirical evidence does not uniformly support the theoretical conclusions. If banks are securitisation active they lend more to risky borrowers, have less diversified portfolios and hold less capital, retain riskier loans and are aggressive in loan pricing. Others argue that securitisation reduces banks insolvency risk, increases profitability, provides liquidity and leads to greater supply of loans. Mortgage securitisation is an area where there is consistent evidence of bank risk taking via securitisation.

Originality/value

The paper identifies open issues for future research.

Details

Review of Behavioral Finance, vol. 8 no. 1
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 1 September 2006

Andreas A. Jobst

The paper surveys the risks and rewards of asset securitisation and illustrates how this structured finance technique can lift credit constraints to small‐ and medium‐sized…

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Abstract

Purpose

The paper surveys the risks and rewards of asset securitisation and illustrates how this structured finance technique can lift credit constraints to small‐ and medium‐sized enterprises (SMEs) as banks to turn more conservative in their lending in response to more risk‐sensitive capital requirements for credit risk.

Design/methodology/approach

The mechanics of securitisation provide an analytical framework and perspective for our analysis of conditions for sustainable SME securitisation and its potential contribution to greater risk diversification of both issuers and investors. The paper also elicits lessons to be learned for essential regulatory and policy measures to guide a sound development of securitisation markets from an empirical review of SME securitisation in Germany.

Findings

The paper finds that the structural versatility of securitisation offers economic benefits irrespective of the configuration of the financial system. The development of a viable securitisation market for SME‐related claims in a bank‐based financial system is likely to require financial sector initiatives, whose scope and intensity might be enhanced by development agencies. Orchestrated policy efforts make for a benign strategy to incubate SME securitisation in a timely fashion, while keeping legal uncertainty and economic attrition to a minimum.

Originality/value

As opposed to previous papers, the paper defines and discusses SME securitisation from both the perspective of bank‐ and firm‐sponsored securitisation and issue hands‐on recommendations for its efficient implementation.

Details

Managerial Finance, vol. 32 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

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