Working Paper: NBER ID: w16849
Authors: Taylor D. Nadauld; Michael S. Weisbach
Abstract: This paper investigates whether the securitization of corporate bank loans had an impact on the price of corporate debt. Our results suggest that loan facilities that are subsequently securitized are associated with a 15 basis point lower spread than that of loans that are not subsequently securitized. To identify the particular role of securitization in loan pricing, we employ a difference in differences approach and consider loan characteristics that are associated with the likelihood of securitization. We document that Term Loan B facilities, facilities originated by banks that originate CLOs, and loans of B-Rated firms are securitized more frequently than other loans. Spreads on facilities estimated to be more likely to be subsequently securitized have lower spreads than otherwise similar facilities. The results are consistent with the view that securitization caused a reduction in the cost of capital.
Keywords: securitization; corporate debt; CLOs; cost of capital
JEL Codes: G21; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| securitization (G10) | cost of corporate debt (G32) |
| securitization-active banks (G21) | spreads on loans (G21) |
| term loan B facilities (G21) | spreads (Y60) |
| brated borrowers from securitization-active banks (G21) | spreads (Y60) |
| demand for securitizable loans from CLOs (G21) | cost of capital for firms (G32) |