Wealth Effects of Credit Risk Securitization in European Banking

Using a unique cross-sectional dataset of 381 cash and synthetic securitizations issued by 53 banks from the EU-15 plus Switzerland between 1997 and 2007, this paper provides empirical evidence for time-dependent negative wealth effects of credit risk securitization announcements in European banking. Baseline results hold when comparing estimated wealth effects with a control group of similar but non-securitizing banks for the relevant time period. Moreover, building several sub samples we find that the nexus between credit risk securitization, the issuing banks' overall risk exposure and wealth effects is associated with a variety of transaction- and bank-specific factors