Religiosity and Bank Asset Securitization

40 Pages Posted: 18 Mar 2017 Last revised: 6 Feb 2018

See all articles by Omneya Abdelsalam

Omneya Abdelsalam

Durham University

Marwa Elnahass

Newcastle University Business School

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Date Written: March 14, 2017

Abstract

The global financial turmoil of 2007-2008 underlines the importance of understanding asset securitization, a process that allows banks to shed credit risk, fund their credit growth, and arbitrage capital requirements. Examining this ethically questionable activity has become crucial given its perceived long-term social impact. This paper examines the factors that motivate banks’ decisions to enter into asset securitization. In particular, we examine the influence of both organizational and geographic religiosity as important ethical parameters of economic choices on banks’ decisions to securitize their assets. We employ propensity scores using a unique database on asset securitization of banks in 22 countries during the period of 2003-2012. We find that both types of religiosity indicators are significantly associated with banks’ decisions to securitize. Banks located in countries with high religious importance scores show a lower likelihood to securitize. We also find that religiously adhered banks are likely to embark on a constrained model of securitization, which involves a high level of monitoring. In addition, our analysis suggests that religiously adhered banks are less likely to engage in asset securitization to reduce credit risk by shifting it to new investors. This conclusion is supported by their lower credit risk in the years before securitization. Alternatively, our results suggest that these banks embark on asset securitization to improve their financial and regulatory performance. Our study emphasizes the importance of considering religiosity as an important institutional factor and a monitoring mechanism in future global banking studies. Findings in this study are of importance to researchers, to local and international regulators, and to different stakeholders in the international banking sector.

Keywords: Asset Securitization, Bank type, Religiosity, Bank Risk

JEL Classification: C23, G01, G21, G28, L50, M41

Suggested Citation

Abdelsalam, Omneya and Elnahass, Marwa and Mollah, Sabur, Religiosity and Bank Asset Securitization (March 14, 2017). Available at SSRN: https://ssrn.com/abstract=2933116 or http://dx.doi.org/10.2139/ssrn.2933116

Omneya Abdelsalam

Durham University ( email )

Old Elvet
Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

Marwa Elnahass

Newcastle University Business School ( email )

5 Barrack Road
Newcastle University Business School
Newcastle Upon Tyne, NE1 4SE
United Kingdom

Sabur Mollah (Contact Author)

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
78
Abstract Views
511
rank
305,618
PlumX Metrics