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The impact of legal advisor‐issuer cooperation on securitization pricing
Author(s) -
Karimov Nodirbek,
Kara Alper,
Downing Gareth
Publication year - 2021
Publication title -
financial markets, institutions and instruments
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 23
eISSN - 1468-0416
pISSN - 0963-8008
DOI - 10.1111/fmii.12153
Subject(s) - issuer , securitization , database transaction , business , yield (engineering) , value (mathematics) , financial system , structured finance , economics , finance , financial crisis , metallurgy , materials science , macroeconomics , machine learning , computer science , programming language
We examine the impact of cooperation between legal advisors and issuers on bank securitization pricing using 6,624 European ABS tranches issued in the European market over the period of 1998 to 2018. We find that previous cooperation is negatively related to initial yield spreads of ABS. Investors seem to attach value to previous cooperation between issuers and legal advisors and consider such transactions less risky by asking for lower yields. We observe that the magnitude of the past relationships is also of importance. Moreover, previous cooperation becomes more important as the risk of the transaction increases. This is especially noticeable when prime (AAA rated) tranches are compared to non‐prime (non‐AAA rated) tranches. Our results also show that the number of legal advisors in a deal does not matter for investors.