Abstract / Description of output
This study examines the effect of the use of Asset-backed Securitisation (ABS) on corporate risk-taking. After careful consideration of self-selection bias and endogeneity, we find that the use of ABS is positively associated with corporate risk-taking. More borrowing through ABS economically and significantly increases corporate risk-taking incentives, through increasing access to credit markets. Employing hand-collected ABS data from 10-K filings in the EDGAR database, we document that firms with larger ABS borrowing capacity and less consumption of credit gain from ABS show more risk-taking incentives afterwards. Further analysis suggests that the ABS systematically affected risk-raking, but unequally across firms. The findings support the theoretical views that low costs of capital, high assets liquidity and good investment opportunities are associated with more corporate risk-taking behaviour. Credit market segmentation and accessibility to the credit market are positively related to risk-taking. The findings highlight the relation between corporate financing and investment decision.
|In preparation - 1 Jun 2022
Keywords / Materials (for Non-textual outputs)
- Asset-backed securitisation; Corporate risk-taking; ABS borrowing; Access to credit