Disentangling the Impact of Securitization on Bank Profitability

Bakoush, M., Abouarab, R., & Wolfe, S. (2019). Disentangling the impact of securitization on bank profitability. Research in International Business and Finance, 47, 519-537.

43 Pages Posted: 10 Jan 2020

See all articles by Mohamed Bakoush

Mohamed Bakoush

University of Southampton - Southampton Business School

Rabab Abouarab

Kafr El Sheikh University

Simon Wolfe

University of Southampton - Southampton Business School

Date Written: September 14, 2018

Abstract

We empirically evaluate the channels through which securitization impacts bank profitability. To this end, we analyze the role played by bank risk, cost of funding, liquidity and regulatory capital in explaining the relationship between securitization and bank profitability. We find that securitization activities tend to boost profitability. We also show that bank risk, cost of funding, liquidity and regulatory capital individually and jointly act as transmission channels in the securitization-profitability relationship. In addition, we break down the securitization effects on bank profitability into direct and indirect effects and identify the contribution of each individual transmission channel in the overall impact on bank profitability. Our findings have several implications for banks, financial markets, and regulators.

Keywords: Securitization; Bank profitability; Bank risk; Regulatory capital; Liquidity; Cost of funding

JEL Classification: G21; C31

Suggested Citation

Bakoush, Mohamed and Abouarab, Rabab and Wolfe, Simon, Disentangling the Impact of Securitization on Bank Profitability (September 14, 2018). Bakoush, M., Abouarab, R., & Wolfe, S. (2019). Disentangling the impact of securitization on bank profitability. Research in International Business and Finance, 47, 519-537., Available at SSRN: https://ssrn.com/abstract=3388959 or http://dx.doi.org/10.2139/ssrn.3388959

Mohamed Bakoush (Contact Author)

University of Southampton - Southampton Business School ( email )

Southampton, SO17 1BJ
United Kingdom

Rabab Abouarab

Kafr El Sheikh University ( email )

Kafr El Sheikh
Egypt

Simon Wolfe

University of Southampton - Southampton Business School ( email )

Southampton, SO17 1BJ
United Kingdom

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