Securitization in Spain and the wealth effect for shareholders

• Published in: International review of economics & finance 2015-05, Vol.37, p.308-323
• Main Authors: López-Penabad, Mª Celia, López-Andión, Carmen, Iglesias-Casal, Ana, Maside-Sanfiz, Jose Manuel
• Format: Article
• Language: English
• Subjects: Banking; Banks; Economic crisis; Event study; Risk exposure; Securitization; Shareholders wealth; Small & medium sized enterprises-SME; Stockholders; Studies; Wealth effect
• ISSN: 1059-0560; 1873-8036
• DOI: 10.1016/j.iref.2014.12.003

This paper examines the relationship between securitization, the issuing bank's overall exposure to risk and the response of the shareholder. Spanish securitization transactions are analyzed using event study methodology which reveals that securitization drains banks' wealth, was most pernicious immediately prior to the subprime crisis and affects small and medium-sized banks most with respect to mortgage collateral transactions. The indirect effect of securitization on originator risk does not affect share value, while the direct effect gives a positive relationship. This effect becomes non-significant in the years prior to the crisis and the shareholders no longer perceive this risk transfer. •Announcements of securitization have some negative effects on the wealth of banks.•This effect was most intense during the two years prior to the crisis.•This effect is most intense in small and medium banks, and in mortgage collateral.•The direct effect of securitization positively affects share prices.•Liquidity and volume of securitization influence share prices.