Wealth effects of asset securitization

This paper examines changes in wealth for firms that securitize assets. Findings are industry specific with wealth increase for finance companies, with no wealth change for industrial companies and automobile companies, and with wealth loss for banks. Further examination, however, reveals that excess returns for banks are significantly related to financial slack in the quarter preceding the securitization announcement. Findings indicate that strong banks experience wealth gain while weak banks experience wealth loss upon the announcement of asset securitization.