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.
- bank risk
- bank failure
- Heckman self-selection
- survival analysis
Chen, Z., Liu, F. H., Opong, K., & Zhou, M. (2017). Short-term safety or long-term failure? Empirical evidence of the impact of securitization on bank risk. Journal of International Money and Finance, 72, 48-74. https://doi.org/10.1016/j.jimonfin.2016.12.003