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Asset Securitization and Optimal Asset Structure of the Firm

Authors: Jure Skarabot;

Asset Securitization and Optimal Asset Structure of the Firm

Abstract

The process of asset securitization is a new and innovative financing method used for funding and risk management purposes. Evolved over the last few decades, securitization represents a substantial and established part of US and global capital markets. In addition to its importance as a financial and asset restructuring tool, securitization originated various streams of academic research. Different models have been developed in order to analyze the theoretical aspects of the process. But some important questions have remained unexplained. The established models don't address why the firm should securitize its assets. They don't investigate if securitization can be a viable alternative for the firm when it chooses its optimal corporate structure. We develop a model of the multi-asset firm which provides an answer to these questions. The model analyzes various corporate structures and validates asset securitization as one of the value maximizing options which can accomplish the optimal incorporation of the assets in the firm. In the framework of the model, the multi-asset firm can optimally choose between aggregating all the assets in one firm, securitizing a part of them through a securitization vehicle, or spinning them off into single-asset firms. For each structure, the debtholders and the equityholders choose the firm's optimal leverage ratio. The optimal asset and capital structure have an effect on the value of tax and non-debt bankruptcy claims. That phenomena leads to a potential increase in the overall value of the firm. For a specific set of the assets, securitization can be a preferred choice, because it avoids the costs associated with the standard bankruptcy procedure for the firm. The model provides a set of testable implications related to the optimal corporate and financial structure of the multi-asset firm and to the subsequent role of securitization.

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
6
Average
Average
Average
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