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Securitization and Crash Risk: Evidence from Large European Banks

Battaglia, Francesca and Buchanan, Bonnie G and Fiordelisi, Franco and Ricci, Ornella (2021) 'Securitization and Crash Risk: Evidence from Large European Banks.' Journal of International Financial Markets, Institutions and Money. ISSN 1042-4431

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Abstract

The global financial crisis highlights the importance of securitization and crash risk. We analyze the relationship between securitization and crash risk in a sample of large European banks listed on the EuroStoxx 600 between 2000 and 2017. We use a dynamic panel data approach to establish a causal relationship. We test the robustness of results with different tail risk measures. Our evidence shows that crash risk declines in the year of securitization and increases the following year. This effect is driven by less complex securitization deals. The risk reduction effect is weaker in crisis periods relative to normal times. Our findings have policy implications as regulators attempt reviving European securitization markets.

Item Type: Article
Uncontrolled Keywords: securitization, crash risk, tail risk, European banks, financial crisis
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 06 Apr 2021 11:51
Last Modified: 06 Apr 2021 11:51
URI: http://repository.essex.ac.uk/id/eprint/30155

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