Date of Award

1989

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

First Advisor

James D. Shilling

Abstract

One of the most important financial innovations in the past few years has been mortgage securitization. This dissertation examines several motives for the issuance of mortgage-backed securities and how the issuance of mortgage-backed securities affects the value of a financial intermediary. Several studies suggest that there is some benefit to mortgage-backed security offerings. Possible reasons for securitization include diversification, funding, avoidance of regulatory taxes, creation of value, and portfolio reshuffling. Much of the empirical literature on the issuance of mortgage-backed securities has focused on depository intermediary risk. However, the effect of mortgage-backed securities on firm value is unclear. The principle hypothesis tested in this dissertation is that the issuances of mortgage-backed securities have positive impacts on the market value of a depository financial intermediary. The abnormal returns represent a potential wealth transfer between the federal deposit insurer and shareholders. The wealth transfer may occur if the assets which remain on the intermediary's books are those most likely to cause insolvency. It is postulated that there may be an asymmetry in information between the intermediary and the insurer in order to achieve the wealth transfer.

Pages

229

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