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Special Purpose Vehicles and Securitization

"Firms can finance themselves on- or off-balance sheet. Off-balance sheet financing involves transferring assets to "special purpose vehicles" (SPVs), following accounting and regulatory rules that circumscribe relations between the sponsoring firm and the SPVs. SPVs are carefully designed to avoid bankruptcy. If the firm's bankruptcy costs are high, off-balance sheet financing can be advantageous, especially for sponsoring firms that are risky. In a repeated SPV game, firms can "commit" to subsidize or "bail out" their SPVs when the SPV would otherwise not honor its debt commitments. Investors in SPVs know that, despite legal and accounting restrictions to the contrary, SPV sponsors can bail out their SPVs if there is the need. We find evidence consistent with these predictions using data on credit card securitizations"--National Bureau of Economic Research web site.

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  • ""Firms can finance themselves on- or off-balance sheet. Off-balance sheet financing involves transferring assets to "special purpose vehicles" (SPVs), following accounting and regulatory rules that circumscribe relations between the sponsoring firm and the SPVs. SPVs are carefully designed to avoid bankruptcy. If the firm's bankruptcy costs are high, off-balance sheet financing can be advantageous, especially for sponsoring firms that are risky. In a repeated SPV game, firms can "commit" to subsidize or "bail out" their SPVs when the SPV would otherwise not honor its debt commitments. Investors in SPVs know that, despite legal and accounting restrictions to the contrary, SPV sponsors can bail out their SPVs if there is the need. We find evidence consistent with these predictions using data on credit card securitizations"--National Bureau of Economic Research web site."@en
  • "We survey the literature on securitization and lay out a research program for its open questions. Securitization is the process by which loans, previously held to maturity on the balance sheets of financial intermediaries, are sold in capital markets. Securitization has grown from a small amount in 1990 to a pre-crisis issuance amount that makes it one of the largest capital markets. In 2005 the amount of non-mortgage asset-backed securities issued in U.S. capital markets exceeded the amount of U.S. corporate debt issued, and these securitized bonds -- even those unrelated to subprime mortgages -- were at center of the recent financial crisis. Nevertheless, despite the transformative effect of securitization on financial intermediation, the literature is still relatively small and many fundamental questions remain open."
  • "Firms can finance themselves on- or off-balance sheet. Off-balance sheet financing involves transferring assets to "special purpose vehicles" (SPVs), following accounting and regulatory rules that circumscribe relations between the sponsoring firm and the SPVs. SPVs are carefully designed to avoid bankruptcy. If the firm's bankruptcy costs are high, off-balance sheet financing can be advantageous, especially for sponsoring firms that are risky. In a repeated SPV game, firms can "commit" to subsidize or "bail out" their SPVs when the SPV would otherwise not honor its debt commitments. Investors in SPVs know that, despite legal and accounting restrictions to the contrary, SPV sponsors can bail out their SPVs if there is the need. We find evidence consistent with these predictions using data on credit card securitizations."
  • "We survey the literature on securitization and lay out a research program for its open questions. Securitization is the process by which loans, previously held to maturity on the balance sheets of financial intermediaries, are sold in capital markets. Securitization has grown from a small amount in 1990 to a pre-crisis issuance amount that makes it one of the largest capital markets. In 2005 the amount of non-mortgage asset-backed securities issued in U.S. capital markets exceeded the amount of U.S. corporate debt issued, and these securitized bonds - even those unrelated to subprime mortgages -- were at center of the recent financial crisis. Nevertheless, despite the transformative effect of securitization on financial intermediation, the literature is still relatively small and many fundamental questions remain open."

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  • "Special purpose vehicles and securitization"
  • "Special purpose vehicles and securization"
  • "Special-purpose vehicles and securitization"
  • "Securitization"
  • "Special Purpose Vehicles and Securitization"
  • "Special Purpose Vehicles and Securitization"@en
  • "Special purpose vehicles and securitization"@en

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