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Market perception of bank risk and securitization in Spain

Author

Listed:
  • Ana Iglesias-Casal
  • Maria Celia López-Penabad
  • Carmen López-Andión
  • Jose Manuel Maside-Sanfiz

Abstract

This paper examines the systematic risk in those banks that participated as issuers of securitization transactions in the Spanish market. Using event study methodol- ogy and allowing systematic risk to change gradually within the event window, this paper provides empirical evidence that securitization has a positive impact on Spanish bank's systematic risk (beta) from the beginning to the end of the event window. Additionally, we assess how much of the beta effect is due to volatility and how much to market cor- relation. The increase in beta is solely due to an increase in banks’ correlations, improving portfolio diversification. The empirical results presented in this paper show important informative implications for the different agents related to banks. This creates a challenge for financial regulation, which has typically focused on individual institutions.

Suggested Citation

  • Ana Iglesias-Casal & Maria Celia López-Penabad & Carmen López-Andión & Jose Manuel Maside-Sanfiz, 2016. "Market perception of bank risk and securitization in Spain," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 17(1), pages 92-108, February.
    • Handle: RePEc:taf:jbemgt:v:17:y:2016:i:1:p:92-108
    DOI: 10.3846/16111699.2013.807867
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    References listed on IDEAS

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    1. João Pinto, 2014. "The Economics of Securitization: Evidence from the European Markets," Working Papers de Economia (Economics Working Papers) 02, Católica Porto Business School, Universidade Católica Portuguesa.
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    Cited by:

    1. Ayesha Afzal & Nawazish Mirza & Fatima Arshad, 2021. "Market discipline in South Asia: Evidence from commercial banking sector," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2251-2262, April.
    2. repec:zbw:bofrdp:2018_026 is not listed on IDEAS
    3. Battaglia, Francesca & Buchanan, Bonnie G. & Fiordelisi, Franco & Ricci, Ornella, 2021. "Securitization and crash risk: Evidence from large European banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).
    4. Deku, Solomon Y. & Kara, Alper & Zhou, Yifan, 2019. "Securitization, bank behaviour and financial stability: A systematic review of the recent empirical literature," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 245-254.

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