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Asymmetric information and the securitization of SME loans

Author

Listed:
  • Ugo Albertazzi

    (ECB -DG Monetary Policy)

  • Margherita Bottero

    (Bank of Italy)

  • Leonardo Gambacorta

    (Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR))

  • Steven Ongena

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR))

Abstract

Using all loans granted to firms recorded in the Italian credit register, we estimate correlations between risk-transfer and default probabilities to gauge the severity of informational asymmetries in the loan securitization market. First, the analysis confirms the presence of information frictions in the SME loan securitisation market. Second, the unconditional quality of securitized loans remains significantly better than that of non-securitized ones, in line with the notion that markets anticipate the presence of information frictions and lead to a selection of loans which offsets the detrimental effects of asymmetric information. Third, using data for firms that maintain multiple bank relationships, we obtain indications of the relative importance played by two forms of information friction, adverse selection and moral hazard. While the former is widespread, the latter is present in weak relationships only, in line with the notion that such loans are characterised by a limited commitment to exert costly monitoring by the bank.

Suggested Citation

  • Ugo Albertazzi & Margherita Bottero & Leonardo Gambacorta & Steven Ongena, 2021. "Asymmetric information and the securitization of SME loans," Swiss Finance Institute Research Paper Series 21-13, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2113
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    Cited by:

    1. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2019. "European Small Business Finance Outlook: June 2019," EIF Working Paper Series 2019/57, European Investment Fund (EIF).
    2. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2017. "European Small Business Finance Outlook: December 2017," EIF Working Paper Series 2017/46, European Investment Fund (EIF).
    3. Bindseil, Ulrich & Corsi, Marco & Sahel, Benjamin & Visser, Ad, 2017. "The Eurosystem collateral framework explained," Occasional Paper Series 189, European Central Bank.
    4. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2019. "European Small Business Finance Outlook: December 2019," EIF Working Paper Series 2019/61, European Investment Fund (EIF).
    5. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2020. "European Small Business Finance Outlook 2020: The impact of COVID-19 on SME financing markets," EIF Working Paper Series 2020/67, European Investment Fund (EIF).
    6. Arfan Wiraguna & Rofikoh Rokhim & Buddi Wibowo & Roy Sembel, 2023. "The Effect of MSME Loan Securitization on Bank Stability: Collective Roles of Mediators," Economic Research Guardian, Mutascu Publishing, vol. 13(2), pages 61-71, December.
    7. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2018. "European Small Business Finance Outlook: June 2018," EIF Working Paper Series 2018/50, European Investment Fund (EIF).
    8. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2021. "European Small Business Finance Outlook 2021," EIF Working Paper Series 2021/75, European Investment Fund (EIF).
    9. Klein, Philipp & Mössinger, Carina & Pfingsten, Andreas, 2021. "Transparency as a remedy for agency problems in securitization? The case of ECB’s loan-level reporting initiative," Journal of Financial Intermediation, Elsevier, vol. 46(C).
    10. Kraemer-Eis, Helmut & Lang, Frank & Torfs, Wouter & Gvetadze, Salome, 2017. "European Small Business Finance Outlook: June 2017," EIF Working Paper Series 2017/43, European Investment Fund (EIF).
    11. Ihor Kravchuk, 2017. "Assets Securitization in European Financial Scope," Oblik i finansi, Institute of Accounting and Finance, issue 2, pages 91-98, June.
    12. Gong, Di & Wu, Jin & Zhu, Jigao, 2023. "When banks' shadow fades and shadow banking rises: Securitization and loan performance in China," BOFIT Discussion Papers 4/2023, Bank of Finland Institute for Emerging Economies (BOFIT).
    13. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2018. "European Small Business Finance Outlook: December 2018," EIF Working Paper Series 2018/53, European Investment Fund (EIF).
    14. Ying Lu & Sha Sun & Mingming Zhang & Zikun Yang, 2024. "RETRACTED ARTICLE: Moving Towards Sustainable Development: Can Supply Chain Finance Promote Corporate Green Innovation?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 13001-13026, September.
    15. Song, Hua & Yang, Xuan & Yu, Kangkang, 2020. "How do supply chain network and SMEs’ operational capabilities enhance working capital financing? An integrative signaling view," International Journal of Production Economics, Elsevier, vol. 220(C).
    16. Krämer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2023. "The European Small Business Finance Outlook 2023," EIF Working Paper Series 2023/96, European Investment Fund (EIF).
    17. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2022. "European Small Business Finance Outlook 2022," EIF Working Paper Series 2022/84, European Investment Fund (EIF).

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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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