Securitization and Capital Structure in Nonfinancial Firms: An Empirical Investigation
Journal of Finance, 69(4) 1787-1825, August 2014
89 Pages Posted: 25 Nov 2011 Last revised: 2 Feb 2018
Date Written: September 17, 2013
Contrary to recent accounts of off-balance sheet securitization by financial firms, we show that asset securitization by nonfinancial firms provides a valuable form of financing to shareholders without harming firms’ debtholders. Using data from firms’ SEC filings, we find that securitization is attractive to firms in the middle of the credit quality distribution, which are the firms with the most to gain. Upon initiation, firms experience positive abnormal stock returns, zero abnormal bond returns, and largely use the securitization proceeds to repay existing debt. Securitization helps minimize financing costs by reducing expected bankruptcy costs and providing access to segmented credit markets.
Keywords: asset-backed securitization, ABS, capital structure, off-balance sheet, SPE, VIE
JEL Classification: G32
Suggested Citation: Suggested Citation