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Asset securitization by non-financial firms

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Date Issued:
2011
Summary:
This dissertation examines several research questions relating to securitization by non-financial firms. Finance theories suggest securitization is most beneficial when there is high demand for liquidity. On the other hand, empirical studies have shown that firms engage in securitization to manage earnings. I find that liquidity demand, not the incentive for earnings management motivates securitization transactions by non-financial firms. I also evaluate whether earnings management in securitization is indeed undesirable from a shareholder's perspective by examining the economic consequences of the practice. Because securitization creates a large infusion of cash, one way to evaluate the economic consequences of earnings management is to examine whether securitization proceeds encourage overinvestment. I find that earnings management in securitization (i.e., recording non-zero securitization income) is unrelated to firms' suboptimal) overinvestment in the post-securitization period. Thus, it appears that earning management in securitization has no negative economic consequence in terms of generating excess securitization proceeds that encourage overinvestment. I also examine the market's valuation of securitizable assets in the accrual components of earnings and the use of securitization proceeds. Because securitizable assets can be converted into cash through securitization, I test whether the market valuation reflects the source of liquidity in securitizable assets that is similar to the cash component of earnings. I find that, for securitization firms, the market valuation of securitizable assets is similar to that of the cash component of earnings.
Title: Asset securitization by non-financial firms: motivation and market valuation.
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Name(s): Huang, Qianyun.
College of Business
School of Accounting
Type of Resource: text
Genre: Electronic Thesis Or Dissertation
Issuance: monographic
Date Issued: 2011
Publisher: Florida Atlantic University
Physical Form: electronic
Extent: xii, 171 p. : ill.
Language(s): English
Summary: This dissertation examines several research questions relating to securitization by non-financial firms. Finance theories suggest securitization is most beneficial when there is high demand for liquidity. On the other hand, empirical studies have shown that firms engage in securitization to manage earnings. I find that liquidity demand, not the incentive for earnings management motivates securitization transactions by non-financial firms. I also evaluate whether earnings management in securitization is indeed undesirable from a shareholder's perspective by examining the economic consequences of the practice. Because securitization creates a large infusion of cash, one way to evaluate the economic consequences of earnings management is to examine whether securitization proceeds encourage overinvestment. I find that earnings management in securitization (i.e., recording non-zero securitization income) is unrelated to firms' suboptimal) overinvestment in the post-securitization period. Thus, it appears that earning management in securitization has no negative economic consequence in terms of generating excess securitization proceeds that encourage overinvestment. I also examine the market's valuation of securitizable assets in the accrual components of earnings and the use of securitization proceeds. Because securitizable assets can be converted into cash through securitization, I test whether the market valuation reflects the source of liquidity in securitizable assets that is similar to the cash component of earnings. I find that, for securitization firms, the market valuation of securitizable assets is similar to that of the cash component of earnings.
Summary: Lastly, I find some evidence supporting the assertion that firms' liquidity prior to securitization influences the market valuation on securitization proceeds retained on the balance sheet, in that the market assigns a discount to retained proceeds for firms with excess liquidity prior to securitiaztion.
Identifier: 754800071 (oclc), 3183122 (digitool), FADT3183122 (IID), fau:3702 (fedora)
Note(s): by Qianyun Huang.
Thesis (Ph.D.)--Florida Atlantic University, 2011.
Includes bibliography.
Electronic reproduction. Boca Raton, Fla., 2011. Mode of access: World Wide Web.
Subject(s): Asset-backed financing
Securities -- United States
Mortgage-backed securities
Debt financing (Corporations)
Held by: FBoU FAUER
Persistent Link to This Record: http://purl.flvc.org/FAU/3183122
Use and Reproduction: http://rightsstatements.org/vocab/InC/1.0/
Owner Institution: FAU