Securitization and crash risk: Evidence from large European banks

Francesca Battaglia, Bonnie G. Buchanan, Franco Fiordelisi and Ornella Ricci

Journal of International Financial Markets, Institutions and Money, 2021, vol. 72, issue C

Abstract: The global financial crisis highlights the importance of securitization and crash risk. We analyze the relationship between securitization and crash risk in a sample of large European banks listed on the EuroStoxx 600 between 2000 and 2017. We use a dynamic panel data approach to establish a causal relationship. We test the robustness of results with different tail risk measures. Our evidence shows that crash risk declines in the year of securitization and increases the following year. This effect is driven by less complex securitization deals. The risk reduction effect is weaker in crisis periods relative to normal times. Our findings have policy implications as regulators attempt reviving European securitization markets.

Keywords: Securitization; Crash risk; Tail risk; European banks; Financial crisis (search for similar items in EconPapers)
JEL-codes: F30 G01 G14 G21 G32 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:72:y:2021:i:c:s1042443121000585

DOI: 10.1016/j.intfin.2021.101339

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