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Did Securitization Affect the Cost of Corporate Debt?

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  • Taylor D. Nadauld
  • Michael S. Weisbach

Abstract

This paper investigates whether the securitization of corporate bank loans had an impact on the price of corporate debt. Our results suggest that loan facilities that are subsequently securitized are associated with a 15 basis point lower spread than that of loans that are not subsequently securitized. To identify the particular role of securitization in loan pricing, we employ a difference in differences approach and consider loan characteristics that are associated with the likelihood of securitization. We document that Term Loan B facilities, facilities originated by banks that originate CLOs, and loans of B-Rated firms are securitized more frequently than other loans. Spreads on facilities estimated to be more likely to be subsequently securitized have lower spreads than otherwise similar facilities. The results are consistent with the view that securitization caused a reduction in the cost of capital.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16849.

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Date of creation: Mar 2011
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Publication status: published as Nadauld, Taylor D. & Weisbach, Michael S., 2012. "Did securitization affect the cost of corporate debt?," Journal of Financial Economics, Elsevier, vol. 105(2), pages 332-352.
Handle: RePEc:nbr:nberwo:16849

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  1. Ulf Axelson & Tim Jenkinson & Per Strömberg & Michael S. Weisbach, 2013. "Borrow Cheap, Buy High? The Determinants of Leverage and Pricing in Buyouts," Journal of Finance, American Finance Association, vol. 68(6), pages 2223-2267, December.
  2. Benmelech, Efraim & Dlugosz, Jennifer, 2009. "The alchemy of CDO credit ratings," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 617-634, July.
  3. Kara, Alper & Marqués-Ibáñez, David & Ongena, Steven, 2011. "Securitization and lending standards: evidence from the wholesale loan market," Working Paper Series 1362, European Central Bank.
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  8. Ivashina, Victoria & Sun, Zheng, 2011. "Institutional demand pressure and the cost of corporate loans," Journal of Financial Economics, Elsevier, vol. 99(3), pages 500-522, March.
  9. Ivashina, Victoria, 2009. "Asymmetric information effects on loan spreads," Journal of Financial Economics, Elsevier, vol. 92(2), pages 300-319, May.
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Cited by:
  1. Haselmann, Rainer & Wachtel, Paul, 2011. "Foreign banks in syndicated loan markets," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2679-2689, October.
  2. Gary Gorton & Andrew Metrick, 2012. "Securitization," NBER Working Papers 18611, National Bureau of Economic Research, Inc.
  3. Jeroen Hessel & Jolanda Peeters, 2011. "Housing bubbles, the leverage cycle and the role of central banking," DNB Occasional Studies 905, Netherlands Central Bank, Research Department.
  4. Jongha Lim & Bernadette A. Minton & Michael Weisbach, 2012. "Syndicated Loan Spreads and the Composition of the Syndicate," NBER Working Papers 18356, National Bureau of Economic Research, Inc.
  5. Norden, Lars & Silva Buston, Consuelo & Wagner, Wolf, 2014. "Financial innovation and bank behavior: Evidence from credit markets," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 130-145.
  6. Krainer, Robert E., 2012. "Regulating Wall Street: The Dodd–Frank Act and the New Architecture of Global Finance, a review," Journal of Financial Stability, Elsevier, vol. 8(2), pages 121-133.

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