Securitization, competition and efficiency

Abstract : This article analyzes the motivation for loan securitization and its effect on loan market efficiency. We consider a two-period loan market competition model in which period 2-competition is affected by the winner's curse. This increases ex ante competition for a greater initial market share. Given that securitization transfers a part of the return from loans to other investors, banks can use it as a tool to signal that they will reduce monitoring, for the purpose of softening ex ante competition. Thus, securitization adversely affects loan market efficiency while it leads banks to increases collectively their profits. This effect is driven by primary loan market competition, not by the exploitation of informational asymmetries in the secondary market for loans.
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Research Seminar Department of Economics and Business, Universitat Pompeu Fabra, Barcelona, Spain. 2010
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https://hal-rbs.archives-ouvertes.fr/hal-00650848
Contributeur : Sandrine Palmer <>
Soumis le : lundi 12 décembre 2011 - 13:35:26
Dernière modification le : jeudi 11 janvier 2018 - 06:19:30

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  • HAL Id : hal-00650848, version 1

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Jung-Hyun Ahn, Régis Breton. Securitization, competition and efficiency. Research Seminar Department of Economics and Business, Universitat Pompeu Fabra, Barcelona, Spain. 2010. 〈hal-00650848〉

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