Deposit Competition and Mortgage Securitization
Danny McGowan, Huyen Nguyen, Klaus Schaeck
Journal of Money, Credit and Banking,
forthcoming
Abstract
We study how deposit competition affects a bank's decision to securitize mortgages. Exploiting the state-specific removal of deposit market caps across the U.S. as a source of competition, we find a 7.1 percentage point increase in the probability that banks securitize mortgage loans. This result is driven by an 11 basis point increase in deposit costs and corresponding reductions in banks' deposit holdings. Our results are strongest among banks that rely more on deposit funding. These findings highlight a hitherto undocumented and unintended regulatory cause that motivates banks to adopt the originate-to-distribute model.
Read article
Alumni
IWH Alumni The IWH maintains contact with its former employees worldwide. We involve our alumni in our work and keep them informed, for example, with a newsletter. We also plan…
See page
Archive
Media Response Archive 2021 2020 2019 2018 2017 2016 December 2021 IWH: Ausblick auf Wirtschaftsjahr 2022 in Sachsen mit Bezug auf IWH-Prognose zu Ostdeutschland: "Warum Sachsens…
See page
Productivity
Productivity: More with Less by Better Available resources are scarce. To sustain our society's income and living standards in a world with ecological and demographic change, we…
See page
Internships
Internship at Halle Institute for Economic Research (IWH) Interested in gaining an authentic insight in the interesting daily business and the variable tasks of an institute for…
See page
Privacy
Data Protection Policy We take the protection of your personal data very seriously and treat your personal data with confidentiality and in compliance with the provisions of law…
See page
IWH EXplore
IWH EXplore Competitive Funding for Research Projects with External Involvement at IWH IWH EXplore gives scientists the opportunity to acquire supplemental funding, in addition to…
See page
Population and labour market
Population and labour market Inhabitants are all people (Germans and foreigners) with permanent residence in federal territory (or in a Land). That does not include members of…
See page
Poison Bonds
Shuo Xia, Rex Wang Renjie
SSRN Discussion Paper,
2023
Abstract
This paper documents the rise of "poison bonds", which are corporate bonds that allow bondholders to demand immediate repayment in a change-of-control event. The share of poison bonds among new issues has grown substantially in recent years, from below 20% in the 90s to over 60% after 2005. This increase is predominantly driven by investment-grade issues. We provide causal evidence that the pressure to eliminate poison pills has led firms to issue poison bonds as an alternative. Further analyses suggest that this practice entrenches incumbent managers, coincidentally benefits bondholders, but destroys shareholder value. Holding a portfolio of firms that remove poison pills but promptly issue poison bonds results in negative abnormal returns of -7.3% per year. Our findings have important implications for understanding the agency benefits and costs of debt: (1) more debt does not necessarily discipline the management; and (2) even without financial distress, managerial entrenchment can lead to conflicts between shareholders and creditors.
Read article
Internships
Internship at Halle Institute for Economic Research (IWH) Interested in gaining an authentic insight in the interesting daily business and the variable tasks of an institute for…
See page
