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The Response of Bank Share Prices to Securitization Announcements

Gasbarro, D., Stevenson, M., Schwebach, R.G. and Zumwalt, J.K. (2005) The Response of Bank Share Prices to Securitization Announcements. Quarterly Journal of Business and Economics, 44 (1/2). pp. 89-105.

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This paper examines the impact of securitization announcements on share prices of multibank holding companies. Prior studies report share price responses are industry-specific. Because a few frequent issuers dominate multibank holding company securitizations, we move from an industry comparison to a comparison of firms within the banking industry. The data are partitioned on financial characteristics, and we observe significantly positive wealth effects for banks with high bond ratings, high financial leverage, low non-interest expense, and high issue frequency. We argue that these characteristics serve as proxies for, respectively, information asymmetry and creditworthiness, financial slack, comparative advantage in loan origination, and reputation. When the data are partitioned into Citigroup, MBNA and other MBHCs, we find that the two major securitizers differ substantially and that the other MBHCs exhibit significantly positive share price responses.

Item Type: Journal Article
Murdoch Affiliation(s): Murdoch Business School
Publisher: University of Nebraska-Lincoln College of Business Administration
Copyright: University of Nebraska-Lincoln College of Business Administration
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