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Information cost and securitization

Author

Listed:
  • Fan, Zhongjie
  • Liu, Zehao
  • Tang, Dunzhe

Abstract

Securitization increases the complexity of assets while incurring associated costs, which enhances asset liquidity by curbing private information production and facilitating asset resale. The liquidity improvement reduces the immediate financing costs for firms, incentivizing them to engage in securitization. Firms have stronger incentive to securitize when the cost of securitization is lower or the underlying assets are less liquid.

Suggested Citation

  • Fan, Zhongjie & Liu, Zehao & Tang, Dunzhe, 2024. "Information cost and securitization," Economics Letters, Elsevier, vol. 239(C).
    • Handle: RePEc:eee:ecolet:v:239:y:2024:i:c:s016517652400243x
    DOI: 10.1016/j.econlet.2024.111759
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    References listed on IDEAS

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    1. Alan Moreira & Alexi Savov, 2017. "The Macroeconomics of Shadow Banking," Journal of Finance, American Finance Association, vol. 72(6), pages 2381-2432, December.
    2. Joongho Han & Kwangwoo Park & George Pennacchi, 2015. "Corporate Taxes and Securitization," Journal of Finance, American Finance Association, vol. 70(3), pages 1287-1321, June.
    3. Gary Gorton, 2017. "The History and Economics of Safe Assets," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 547-586, September.
    4. Agarwal, Sumit & Chang, Yan & Yavas, Abdullah, 2012. "Adverse selection in mortgage securitization," Journal of Financial Economics, Elsevier, vol. 105(3), pages 640-660.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Information sensitivity; Securitization; Information cost;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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