Bondholder’s Trustee

Bazzana, Flavio

doi:10.1007/978-1-4614-7753-2_78

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Intermediaries As Delegated Monitors1

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2019

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“…Furthermore, the legal literature (Bazzana, 2012;Schwarcs & Sergi, 2008) agrees that the appointment of a trustee is a more efficient option because this intermediary could facilitate coordination of strategies among investors and mitigate costly individual investor actions.…”

Section: Intermediaries As Delegated Monitorsmentioning

confidence: 99%

Trustee reputation in securitization: When does it matter?

2019

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We consider the role of trustees–who are nominated to protect the interests of investors–in securitization pricing and whether investors rely on them to mitigate risks. In particular, we examine the effect of trustee reputation on initial yield spreads of European mortgage‐backed security (MBS) issuances between 1999 and the first half of 2007. We find that engaging reputable trustees led to lower spreads during the credit boom period prior to the 2007–2009 financial crisis. Our findings suggest that trustees’ reputation was considered by investors to be more important when risk assessment became more challenging.

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Section: Intermediaries As Delegated Monitorsmentioning

confidence: 99%