Employing a unique and hand-collected sample of 648 true sale loan securitization transactions issued by 57 stock-listed banks across the EU-12 plus Switzerland over the period from 1997 to 2010, this paper empirically analyzes the relationship between true sale loan securitization and the issuing banks’ non-performing loans to total assets ratios. Overall, we provide evidence for a negative impact of securitization on NPL exposures suggesting that banks predominantly used securitization as an instrument of credit risk transfer and diversification. In addition, the analysis at hand reveals a time-sensitive relationship between securitization and NPL exposures. While we observe an even stronger NPL-reducing effect through securitization during the non-crisis periods, the effect reverses during and after the global financial crisis suggesting that banks were forced to provide credit enhancement and employ securitization as a funding management tool. Along with the results from a variety of sensitivity analyses our study provides important implications for the recent debate on reducing NPL exposures of European banks by revitalizing the European securitization market.

Employing main and sector-specific investment-grade CDS indices from the North American and European CDS market and performing mean-variance out-of-sample analyses for conservative and aggressive investors over the period from 2006 to 2014, this paper analyzes portfolio benefits of adding corporate CDS indices to a traditional financial portfolio consisting of stock and sovereign bond indices. As a baseline result, we initially find an increase in portfolio (downside) risk-diversification when adding CDS indices, which is observed irrespective of both CDS markets, investor-types and different sub-periods, including the global financial crisis and European sovereign debt crisis. In addition, the analysis reveals higher portfolio excess returns and performance in CDS index portfolios, however, these effects clearly differ between markets, investor-types and sub-periods. Overall, portfolio benefits of adding CDS indices mainly result from the fact that institutional investors replace sovereign bond indices rather than stock indices by CDS indices due to better risk-return characteristics. Our baseline findings remain robust under a variety of robustness checks. Results from sensitivity analyses provide further important implications for institutional investors with a strategic focus on a long-term conservative portfolio management.