Asset Securitization and Asymmetric Information

Edward M. Iacobucci and Ralph A. Winter ()

Journal of Legal Studies, 2005, vol. 34, pages 161-206

Abstract: We analyze the incentives for asset securitization that flow from informational asymmetries within a corporation. Within the framework of “hidden-action” asymmetries, securitization of those cash flows that are relatively insensitive to managerial effort leaves critical incentive devices more high powered and more focused on cash flows that matter. In addition, asset securitization exchanges a stream of future cash inflows for a lump-sum cash inflow, which enhances monitoring and control of management expenditures. Within the “hidden-information” framework, asset securitization can be explained by asymmetric information (1) between insiders and outside investors about the value of nonsecuritized assets or (2) between insiders and outsider investors about the value of securitized assets. In both hidden-information theories, asset securitization is driven by the propensity of the market to allocate assets to investors who are best informed about asset values.

Date: 2005
View citations in EconPapers

Downloads: (external link)
http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/427765 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ucp:jlstud:v:34:y:2005:p:161-206

Ordering information: This journal article can be ordered from
http://www.journals.uchicago.edu/JLS/order1.html

Access Statistics for this article

Journal of Legal Studies is edited by Eric A. Posner and Thomas J. Miles

More articles in Journal of Legal Studies from University of Chicago Press
Address: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637
Series data maintained by Christopher F. Baum ().