About motives behind Securitization and its Implications: An Overview of Empirical Findings

This article reviews empirical findings concerning motives behind securitization and its implications. It turns out that the main reasons for securitization are: earnings management, regulatory capital arbitrage, liquidity management and funding problems. Securitization favours risk taking by entities in bad financial conditions and weakens, in some cases, incentives for careful screening of potential borrowers. On the macroeconomic level securitization lowers credit interest rates in the long term.