Title: Loan securitisation and accounting measurement methods in banks

Authors: Sang-Lyul Ryu; Jayoun Won

Addresses: College of Business, Konkuk University, 120 Neungdong-ro, Gwangjin-gu, Seoul, 05029, South Korea ' College of Global Business, Korea University, 2511 Sejong-ro, Sejong, 30019, South Korea

Abstract: This paper examines the extent to which banks securitise loans under three accounting measurement methods: historical cost, lower-of-cost-or-market and fair value. Securitisation is becoming an indispensable tool for financing liquidity in the global capital market. Prior research has developed different models to analyse why a firm securitise its assets. The established models do not address if accounting measurement methods have different effects on loan securitisation. In our model, the bank's loan securitisation is jointly determined by the weight on earnings for each period and the marginal expected rate of return on new investments under the three measurement methods.

Keywords: loans; securitisation; historical cost; HC; lower-of-cost-or-market; LCM; fair value; FV.

DOI: 10.1504/IJEPEE.2020.109576

International Journal of Economic Policy in Emerging Economies, 2020 Vol.13 No.4, pp.312 - 326

Received: 19 Jun 2019
Accepted: 02 Dec 2019

Published online: 15 Sep 2020 *

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