Securitization and credit quality in the European market
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....
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Blackwell Publishing Ltd
2019
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| Subjects: | |
| Online Access: | View Fulltext in Publisher |
| Summary: | 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. © 2018 John Wiley & Sons, Ltd. |
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| ISBN: | 13547798 (ISSN) |
| DOI: | 10.1111/eufm.12168 |