Abstract

http://ssrn.com/abstract=1894734
 
 

References (28)



 
 

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Why Did Holdings of Highly Rated Securitization Tranches Differ So Much Across Banks?


Isil Erel


Ohio State University (OSU) - Department of Finance

Taylor Nadauld


Brigham Young University

René M. Stulz


Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

February 4, 2015

Charles A. Dice Center Working Paper No. 2012-27
Fisher College of Business Working Paper Paper No. 2012-03-027
ECGI - Finance Working Paper No. 313/2011

Abstract:     
We provide estimates of holdings of highly rated securitization tranches of U.S. bank holding companies before the credit crisis and evaluate hypotheses that have been advanced to explain them. Whereas holdings exceeded Tier 1 capital for some large banks, they were economically trivial for the typical bank. Banks with high holdings were not riskier before the crisis using conventional measures, but they performed poorly during the crisis. We find that holdings of highly rated tranches were correlated with a bank’s securitization activity. Theories unrelated to the securitization activity, such as “bad incentives” or “bad risk management,” are not supported in the data.

Number of Pages in PDF File: 71

Keywords: financial crisis, too-big-to-fail, securitization, credit crisis, regulatory arbitrage

JEL Classification: G01, G21


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Date posted: July 25, 2011 ; Last revised: February 7, 2015

Suggested Citation

Erel, Isil and Nadauld, Taylor and Stulz, René M., Why Did Holdings of Highly Rated Securitization Tranches Differ So Much Across Banks? (February 4, 2015). Charles A. Dice Center Working Paper No. 2012-27; Fisher College of Business Working Paper Paper No. 2012-03-027; ECGI - Finance Working Paper No. 313/2011. Available at SSRN: http://ssrn.com/abstract=1894734 or http://dx.doi.org/10.2139/ssrn.1894734

Contact Information

Isil Erel
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

Taylor Nadauld
Brigham Young University ( email )
Provo, UT 84602
United States
Rene M. Stulz (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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