AbstractsBusiness Management & Administration

Prior research examines how investors view asset securitizations, and shows that investors treat securitizations as borrowings even when GAAP treats them as sales. Upon the adoption of two new accounting standards relating to asset securitizations, some off-balance-sheet securitized assets were consolidated back onto firms’ balance sheets. This study examines whether the new accounting standards result in financial reporting that is more aligned with investors’ views of asset securitizations. To address this question, this study investigates how investors viewed previously off-balance-sheet securitized assets before the two new standards became effective. In doing so, it separately examines assets that firms consolidated under the new standards and those that firms left unconsolidated. I find that investors differentiated between these two types of securitizations, treating the consolidated assets as borrowings and the unconsolidated assets as sales. I conclude that the new accounting standards are more consistent with equity investors’ views of asset securitizations.