Borsa Istanbul Review (Nov 2023)

Asset securitization and bank stock price performance: Bubble increase or risk transfer?

  • Qinghan Liu,
  • Rumiao Li,
  • Mahmood Ahmad,
  • Zongqiang Ren

Journal volume & issue
Vol. 23, no. 6
pp. 1474 – 1486

Abstract

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In this study, we analyzed 40 commercial bank annual reports from 2014 to 2021 to clarify the influence of tangible and intangible asset securitization on bank stock price bubbles, based on the banks’ preference for issuing asset securitization. The empirical findings show that tangible asset securitization suppresses the emergence of bank stock price bubbles by improving internal control quality. In contrast, intangible asset securitization weakens the internal control quality while enhancing bank liquidity, exacerbating stock price bubbles. Furthermore, the results of configuration research found interactions between factors that impact bank stock price bubbles, no single factor is necessary to exacerbate bank stock price bubbles. Additionally, three configurations dominate high stock price bubbles in banks: liquidity, credit, and profit risks. The study recommends that banks develop asset securitization issuance policies, promote business transformation, prevent and resolve systemic risks, and facilitate capital market improvement and high-quality economic development.

Keywords