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Securitization and Bank Efficiency

Zhizhen Chen ^a

Frank Hong Liu ^b

Jin Peng ^c

Haofei Zhang ^d

Mingming Zhou ^e

^aUniversity of Greenwich, UK

^bUniversity of Loughborough, UK

^cUniversity of Colorado, USA

^dNankai University, China

^ePace University, USA

Empirical Research in Banking and Corporate Finance

ISBN: 978-1-78973-398-3, eISBN: 978-1-78973-397-6

Publication date: 12 September 2022

Abstract

We examine whether loan securitization has an impact on bank efficiency. Using a sample of large US commercial banks from 2002 to 2012, we find that bank loan securitization has a significant and positive impact on bank efficiency, and this relationship is stronger for banks with higher capital ratios, higher default risk, and lower level of liquidity and diversification. Our results are robust to Heckman self-selection correction and difference-in-difference (DID) analysis. In addition, these results are found mainly in non-mortgage loan securitizations but not in mortgage loan securitizations. Finally, we show that loan sales also have a positive impact on bank efficiency.

Keywords

Acknowledgements

Acknowledgments

We would like to thank two anonymous referees and the Editors for many useful comments. We would also like to thank Thomas Chemmanur, Iftekhar Hasan, Shan He, Kose John, Debarshy Nanda, and Anthony Saunders for helpful commends and discussions.

Citation

Chen, Z., Liu, F.H., Peng, J., Zhang, H. and Zhou, M. (2022), "Securitization and Bank Efficiency", Ferris, S.P., John, K. and Makhija, A.K. (Ed.) Empirical Research in Banking and Corporate Finance (Advances in Financial Economics, Vol. 21), Emerald Publishing Limited, Leeds, pp. 191-222. https://doi.org/10.1108/S1569-373220220000021007

Publisher

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Emerald Publishing Limited