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Securitization and Credit Quality in the European Market

Kara, Alper, Marques-Ibanez, David and Ongena, Steven (2018) Securitization and Credit Quality in the European Market. European Financial Management. ISSN 1468-036X

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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.

Item Type: Article
Uncontrolled Keywords: Securitization; Credit risk; European market
Subjects: H Social Sciences > HG Finance
Schools: Huddersfield Business School
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Depositing User: Jonathan Cook
Date Deposited: 08 Jan 2018 10:51
Last Modified: 13 Jul 2018 08:30
URI: http://eprints.hud.ac.uk/id/eprint/34164

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