The impact of securitization on credit rationing: Empirical evidence |
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| Institution: | 1. Bangor Business School, FUNCAS and CUNEF Bangor Business School, Hen Goleg, Bangor University, College Road, Bangor LL57 2DG, United Kingdom;2. KU Leuven and CEPR University of Leuven, Naamsestraat 69, 3000 Leuven, Belgium;3. University of Granada and FUNCAS Facultad de CCEE y Empresariales, Campus Cartuja s/n, 18011, Granada, Spain;1. Université catholique de Louvain, Louvain School of Management, Place des Doyens 1, 1348 Louvain-la-Neuve, Belgium;2. Université de Lille – SKEMA Business School, Université Lille 2, Rue de Mulhouse 2 – BP 381, 59020 Lille Cédex, France;1. American Enterprise Institute, 1789 Massachusetts Avenue, NW, Washington, DC 20036, United States;2. Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429, United States;3. Mason School of Business, College of William & Mary, P.O. Box 8795, Williamsburg, VA 23187, United States;1. Fluminense Federal University, Department of Economics and National Council for Scientific and Technological Development (CNPq), Brazil;2. Fluminense Federal University, Department of Economics, Brazil;1. Dipartimento di Studi Aziendali e Quantitativi, Università Parthenope, Via Generale Parisi 13, 80132 Napoli, Italy;2. Dipartimento di Studi Aziendali, Università degli Studi di Salerno, Via Ponte don Melillo, 84084 Fisciano (SA), Italy;3. Dipartimento di Scienze Aziendali, Università della Calabria, Via p. Bucci cubo 3C, 87036 Rende (CS), Italy;1. Institute of International Economy, University of International Business and Economics, China;2. National School of Development, Peking University, China |
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| Abstract: | We study whether banks’ involvement into different types of securitization activity – asset backed securities (ABS) and covered bonds – in Spain influences credit supply before and during the financial crisis. While both ABS and covered bonds were hit by the crisis, the former were hit more severely. Employing a disequilibrium model to identify credit rationing, we find that firms with banks that were more involved in securitization see their credit constraints more relaxed in normal periods. In contrast, only greater covered bonds issuance reduces credit rationing during crisis periods whereas ABS aggravates these firms’ credit rationing in crisis periods. Our results are in line with the theoretical predictions that a securitization instrument that retains risk (covered bond) may induce a more prudent risk behavior of banks than an instrument that provides risk transferring (ABS). |
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| Keywords: | Financial crisis Securitization Credit rationing G21 |
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