Special purpose vehicles and securitization
By: Gary Gorton, Nicholas S. Souleles.
Contributors: Souleles, Nicholas S.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11190; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11190.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Corporations -- Accounting -- Corrupt practices.; Fraudulent conveyances.; Asset-backed financing.; Corporations -- Finance.; Bankruptcy.
Description: "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.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 3/15/2005.
Also available in print.
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Mode of access: World Wide Web.