Loan Securitization in China's Financial Reform — Based on Evidence from Thirty-five Listed Banks in China
Journal: Modern Economics & Management Forum DOI: 10.32629/memf.v2i1.271
Abstract
This paper studies loan securitization in China's financial reform. By using Logit and Tobit model to study 35 Chinese listed commercial bank's data from 2012 to 2019, the author employs the factor analysis to summarize the information from some financial indicators that reveals banks' securitization determinants. The author also conducts a sensitive analysis and a credit-deposit relationship estimation to examine the impacts of loan securitization. It is found that determinants of China's banks' securitization include cost advantage exploitation and performance promotion. The incentive of risk transfer involves risks from stock market rather than non-performing loan. There is little evidence that loan securitization improves the income structure of banks and the investment efficiency of financial market. Moreover, the credit-deposit relationship of securitized banks is improved. The paper concludes that China's loan securitization market welcomes large banks with high quality loan rather than small banks. Default risks of banks themselves rather than that of loan customers affect bank's securitization decision more. Safe and high-yield spread business is still the best investment of loan securitization proceeds. The loan securitization market should be developed continuously and rapidly, which is of great implications to China's financial reform.
Keywords
loan securitization, factor analysis, China’s financial reform, Chinese commercial banks
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