Securitization And Bank Performance

Date Added: Sep 2009
Format: PDF

Theory suggests that securitization provides financial institutions with an opportunity to lower the cost of funding; improve credit risk management and increase profitability. In practice, however, it might lead to adverse consequences through a number of indirect channels. Therefore, the net impact of securitization on bank performance is ambiguous. This paper aims to evaluate whether banks improve their performance through the use of the securitization market by applying a propensity score matching approach. In other words, a counterfactual group of banks is build to assess what would have happened to the securitizing banks had they not securitized.