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A Discrete Random Effects Logit Model of the Determinants of Asset-Backed Securitization

Journal of Financial Studies

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Title A Discrete Random Effects Logit Model of
the Determinants of Asset-Backed Securitization
 
Creator Yang-Pin Shen
Li-Ching Chiu
Chiuling Lu
 
Description A discrete random effects logit model that allows unobserved heterogeneity in asset securitization
behavior among individual firms to be controlled is investigated using firm-level panel data. The
empirical result shows that both observed firm characteristics and unobserved firm-level heterogeneity
are important determinants of the incidence of asset securitization behavior. Securitizing firms tend to be
more profitable than firms that do not securitize assets, which is consistent with the information
signaling theory. Consistent with the free cash flow theory, we find that securitizing firms can be
characterized as having a combination of unfavorable investment opportunities and relatively large cash
flows. Managers may use asset securitization to convey information to the market about how their firm
will use future cash flows. The alleviating debt agency cost is identified as an important driver of asset
securitization, in particular for firms with a high debt ratio but high growth. Our estimates also show that
securitizing firms are larger and have less capital than their non-securitizing counterparts. However, the
debtholder expropriation and overinvestment problems are not its main drivers. The results of this study
have important managerial implications.

Key words: Asset-backed securitization, information signaling, agency theory, free cash flow, discrete random effects logit model.
 
Publisher Journal of Financial Studies
財務金èžå­¸åˆŠ
 
Date 2011-05-27
 
Type —
 
Format application/pdf
 
Identifier http://www.jfs.org.tw/index.php/jfs/article/view/2011129
 
Source Journal of Financial Studies; Vol 16, No 2 (2008); 69
財務金èžå­¸åˆŠ; Vol 16, No 2 (2008); 69
 
Language —