Securitization and Bank Performance: Some Empirical Evidence on US Commercial Banks

7 Pages Posted: 12 May 2010

See all articles by Anna Sarkisyan

Anna Sarkisyan

University of Essex - Essex Business School

Barbara Casu

City University London - Sir John Cass Business School

Andrew Clare

City University London - Sir John Cass Business School

Steve Thomas

City University London - Sir John Cass Business School

Date Written: April 1, 2010

Abstract

By using securitization, a bank is able to lower its cost of funding, improve risk management and increase profitability.The key to the realization of the potential benefits of securitization lies in the quality of the underlying receivables, which, in turn, is directly related to the underwriting and credit risk management employed.

Therefore, as evidenced during the recent financial crisis, securitization might have adverse implications for bank performance. Based on a sample of US commercial banks over the period 2001-2008, univariate analysis indicates that securitizing banks are more profitable, but with higher credit risk exposure and higher cost of funding. Our evidence raises important questions about banks motives for increasing securitization activities and consequent implications.

Keywords: Securitization, Bank performance

JEL Classification: G21, G32

Suggested Citation

Sarkisyan, Anna and Casu, Barbara and Clare, Andrew D. and Thomas, Stephen H., Securitization and Bank Performance: Some Empirical Evidence on US Commercial Banks (April 1, 2010). Bancaria Special Issue No.03-2010. Available at SSRN: https://ssrn.com/abstract=1603787

Anna Sarkisyan (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

HOME PAGE: http://www.essex.ac.uk/ebs/staff/profile.aspx?ID=2004

Barbara Casu

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Andrew D. Clare

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Stephen H. Thomas

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 (0) 20 7040 5271 (Phone)
+44 (0) 20 7040 8881 (Fax)

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