Research On The Adverse Selection In The Process Of China's Credit Asset Securitization

In 2008,the global financial crisis triggered by the US subprime mortgage crisis caused great damage to the world economy.So far,the world economy has not fully recovered from the impact of global fin ancial crisis.It is widely believed that excessive asset securitization is the "culprit" of the US subprime mortgage crisis.Since then,the existence of adverse selection in the process of asset securitization has become a focus of research and attracted lively debates.In 2012,the People's Bank of China and China Securities Regulatory Commission jointly issued a policy to restart credit asset securitization.Under the guidance and support of relevant policies,China's credit asset securitization market has expanded rapidly,and the market operation mechanism has been gradually improved.By the end of 2016,the scale of credit asset securitization has reached about 1 trillion yuan,which has become an important channel for bank refinancing.An empirical study on the adverse selection problem in the process of credit asset securitization in this paper has theoretical and practical significance.On the one hand,it can enrich the existing academic research on asset securitization theory.On the other hand,it can provide some policy implications to relevant regulatory agencies for their regulatory policy formulation and supervision practice.Also,this paper can provide investment advices to investors who are involved in asset securitization market.By employing the annual panel data of the Chinese banks over the period of 2012-2016,this paper applies the SystemGeneralized Method of Moments(SYS-GMM)to study the relationship between the bank's nonperforming loans rate and the scale of bank credit asset securitization.Based on our empirical results,we make judgment whether there is adverse selection problem in the process of the Chinese bank's credit asset securitization.The results show that there is a significant negative correlation between the bank's nonperforming loans rate and the securitization of credit assets.It indicates that in the process of credit asset securitization,Chinese banks transfer part of the low-quality loans to the off-balance sheet through asset securitization.There is an adverse selection problem in the process of asset securitization of Chinese banks.According to our findings of existing adverse selection in the process of credit asset securitization in China,this paper gives some suggestions on how to strengthen the information disclosure,to establish the asset securitization structure standard,and to enhance credit rating supervision,in order to promote a sustainable development of China's credit asset securitization market.