The Influence of Sponsor, Servicer, and Underwriter Characteristics on RMBS Performance
EBS Universität für Wirtschaft und Recht - EBS Business School
EBS Business School
EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance, Accounting and Real Estate
July 13, 2011
Financial Markets and Portfolio Management, Vol. 25, No. 3, pp. 281-311, 2011
This paper assesses how the default frequencies of RMBS loan portfolios vary depending on sponsor, servicer, and underwriter characteristics. We find that the larger and healthier the sponsor of the transaction, the lower the default frequency of the securitized loans. This finding is consistent with the hypothesis that banks with a longer market perspective are less willing to risk their good reputation for a gain in short-term profits. More surprisingly, we find that there is a negative relationship between the market share of the lead underwriter and default frequency. In contrast to reputational capital theory, it appears that investment banks with high market shares in the securitization business exploit their reputational capital.
Keywords: securitization, Information asymmetries, reputation
JEL Classification: G21, G24, G32Accepted Paper Series
Date posted: August 29, 2011
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