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Short-term safety or long-term failure? Empirical evidence of the impact of securitization on bank risk

Zhizhen Chen, Frank Hong Liu, Kwaku Opong and Mingming Zhou

Journal of International Money and Finance, 2017, vol. 72, issue C, 48-74

Abstract: Based on a sample of U.S. commercial banks from 2002 to 2012, this paper shows that bank loan securitization has a significant and positive impact on both Z-scores and the likelihood of bank failure, indicating a short-term risk reduction and a long-term risk increase effect. We also find disparate impacts between mortgage and non-mortgage securitization. Loan sale activities are found to have a similar impact to securitization.

Keywords: Securitization; Bank risk; Bank failure; Heckman self-selection; Survival analysis (search for similar items in EconPapers)
JEL-codes: G10 G20 G21 (search for similar items in EconPapers)
Date: 2017
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