Essays in asset securitisation
The objective of this thesis is to consider the role of securitisation undetaken by firms in the financial sector by looking at five different questions related to securitisation. The thesis begins with a comparison of the institutional and market characteristics of securitisation in the US and Europe. The wide gap in their respective securitisation growth rates may be attributed to the presense of US government subsides to securitisation, and more restrictive aspects of banking regulation. After a review of theoretical and empirical work, the thesis addresses a key question: in the absense of subsides, why do depository institutions securitise? Employing UK data, the validity of two hypothesis are tested. These are the comparative advantage hypothesis which treats securitisation as evidence of disinter mediation and the financing hypothesis which argues that depository institutions use securitisation to raise finance. The third question is which banks raise external finance by securitising assets and what are the consequences for shareholder wealth? The role of securitisation in a bank's optimal capital structure is explored. Fourth, the thesis looks at whether there are differences in the pricing behaviour of financial firms which originate assets to finance them through securitisation, and depository institutions which use a variety of funding sources. Finally, the factors which influence the price of asset-backed securities at issue and in the secondary markets are examined. The main findings from the econometric tests are UK data show the financing hypothesis to be superior.