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Securitization and credit quality in the European market


Kara, Alper; Marques-Ibanez, David; Ongena, Steven (2019). Securitization and credit quality in the European market. European financial management, 25(2):407-434.

Abstract

We assess the effect of securitization activity on relative credit quality employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that at issuance, based on observable characteristics, banks do not seem to select and securitize loans of lower credit quality. Following securitization, the credit quality of borrowers whose loans are securitized deteriorates more than those in the control group. We find that poorer performance by borrowers of securitized loans seems to be connected to banks’ reduced monitoring incentives. Our results are supported by two additional methodologies and robust to controlling for predetermined borrower-lender matching.

Abstract

We assess the effect of securitization activity on relative credit quality employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that at issuance, based on observable characteristics, banks do not seem to select and securitize loans of lower credit quality. Following securitization, the credit quality of borrowers whose loans are securitized deteriorates more than those in the control group. We find that poorer performance by borrowers of securitized loans seems to be connected to banks’ reduced monitoring incentives. Our results are supported by two additional methodologies and robust to controlling for predetermined borrower-lender matching.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Accounting
Social Sciences & Humanities > General Economics, Econometrics and Finance
Scope:Discipline-based scholarship (basic research)
Language:English
Date:1 March 2019
Deposited On:30 Oct 2019 09:58
Last Modified:22 Mar 2024 02:45
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:1354-7798
OA Status:Closed
Publisher DOI:https://doi.org/10.1111/eufm.12168
Other Identification Number:merlin-id:15630