Institut für Kreditwesen
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Joint work with Arved Fenner and Carina Mössinger
Presented at WWU (Münster), HVB Doctoral Seminar 2019 (Hannover), Research Seminar at the University of Paderborn 2019 (Paderborn), BGSE Summer School 2019 (Barcelona), DGF 2019 (Essen), SFA 2019 (Orlando), Banking Workshop 2019 (Münster), PFMC 2019 (Paris), Australasian Finance & Banking Conference 2019 (Sydney), Sydney Banking and Financial Stability Conference 2019 (Sydney), IBEFA 2020 (San Diego), SGF 2020 (Zürich, accepted but canceled), FFI 2020 (Stockholm), Research Seminar in Contract Theory, Banking and Money at the University of Zurich 2020 (Zurich), Bundesbank Research Seminar 2020 (online), AFA 2021 (online), NFA (online), “Credit Risk over the Business Cycle” conference organized by Deutsche Bundesbank, FRIC Center, and CEPR (online), EUROFIDAI Paris December 2021 Finance Meeting (online), European DataWarehouse Winter 2022 Research Webinar (online), FIRS 2023 (Vancouver), CEBRA 2023 (geplant, New York)
Abstract: We investigate the replenishment of 102 asset-backed securities (ABS) backed by more than 1.7 million small- and medium-sized enterprise loans. Using an extensive data set from 2012 to 2017 obtained from the only ABS loan-level repository in Europe, we reveal that loans added to securitized portfolios after the transactions’ closing perform worse than loans being part of the initial portfolio. We additionally provide evidence that originators induce these performance differences by adding low-quality loans to securitized portfolios. This behavior is only partially captured by market prices, but mitigated by originators’ reputation efforts, increasing transparency in the market, and most effectively their interaction.
Joint work with Jörn Debener, Arved Fenner and Steven Ongena
Presented at WWU (Münster), University of Zurich, and the University of Tübingen, 2021 Conference of the International Finance and Banking Society, the 2021 International Risk Management Conference, the 2021 Münster Banking Research Workshop, the 35th Australasian Finance and Banking Conference, the 38th International Conference of the French Finance Association, the 2022 Summer Meeting of the International Banking, Economics and Finance Association, the 2022 Annual Meeting of the European Financial Management Association, the 2022 European Conference of the Financial Management Association, 2023 Annual Meeting of the European Economic Association (geplant), 2023 Annual Meeting of the German Operations Research Society (geplant)
Abstract: We investigate the textual disclosure in over 1,000 issuance prospectuses from all asset-backed security (ABS) deals reported under the loan-level reporting initiative of the European Central Bank. The quality and the quantity of textual disclosure, measured as the share of boilerplate language, the linguistic complexity, and the disclosure length, substantially affect investors’ pricing at security issuance beyond all observable risk factors. Moreover, investors’ risk assessment is weakened because the resulting prices are less predictive for future security performance. Recent EU regulations aiming at addressing these problems have homogenized the quality and quantity of textual disclosure in ABS prospectuses. Our results have important implications for market participants and regulators alike, placing the quality and quantity of textual disclosure in prospectuses high on their agenda.
Joint work with Alexander Nitschke and Andreas Pfingsten
Presented at Banking Workshop Münster 2022, PFMC 2022, Southwestern Finance Association Conference 2023, AFFI 2023, CEBRA 2023 (geplant)
Abstract: Securitization can serve different purposes. We focus on a sample of transactions which aim at releasing capital, so-called capital relief trades (CRTs). Ex ante, it turns out that, as expected, higher total capital ratios decrease the likelihood of a CRT, and larger banks are more likely to conduct CRTs. By contrast, the non-performing loans ratio has only a marginal effect on this likelihood and liquidity ratios basically none. The situation changes remarkably when examining determinants of the number of CRTs or their volumes. The total capital ratio has no significant effect anymore, but higher non-performing loans ratios now come along with less CRTs and lower volumes, presumably because banks cannot afford to realize considerable hidden burdens of their loan portfolios. Ex post, we observe that neither the occurrence, nor the frequency or the size of a CRT change any of the following ratios: total capital ratio, non-performing loans ratio, liquid assets to total assets, loans to total assets. These results have important policy implications as they indicate that banks, by and large, use CRTs to eventually increase their lending, which is a key objective when trying to restore the market for securitizations.