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Securitization and financial solvency: empirical evidence from Portugal

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

Abstract

This paper analyses the effect of securitization issues on the solvency of Portuguese financial institutions. For this purpose, we use an unbalanced panel model estimated using GMM methods and find that securitization has a slightly positive impact on the soundness of the issuing entity. We study 35 financial entities and 60 traditional securitizations issued by 9 originators between 2001 and 2013. The analysis reveals that the financial entities’ soundness improved slightly, showing that securitization enhanced the quality of the originators’ portfolios and increased the regulatory capital requirements. We also found that efficiency and profitability improve the risk-adjusted ROAA and that efficiency increases regulatory capital requirements. The robustness analysis confirms the positive effect of securitization on solvency, where both credit quality and liquidity are shown to be significant variables.

Suggested Citation

  • Carmen López-Andión & Ana Iglesias-Casal & Maria Celia López-Penabad & Jose Manuel Maside-Sanfiz, 2019. "Securitization and financial solvency: empirical evidence from Portugal," The European Journal of Finance, Taylor & Francis Journals, vol. 25(2), pages 155-166, January.
    • Handle: RePEc:taf:eurjfi:v:25:y:2019:i:2:p:155-166
    DOI: 10.1080/1351847X.2018.1492948
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    Cited by:

    1. Helder Ferreira de Mendonça & Vívian Íris Barcelos, 2021. "Securitization of assets and risk transfer in a large emerging market: Evidence from Brazil," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 580-605, October.

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