ABSTRACT: Relative to recording securitizations as collateralized borrowings, the “gain on sale” treatment has several accounting benefits such as reducing leverage, increasing earnings, and improving efficiency. We investigate whether managers engage in real transaction management to take advantages of these benefits. We predict that in order to maximize financial statement window‐dressing, managers will engage in securitizations toward the end of the quarter. We find that 41 percent of the quarter's transactions occur in the third month of the quarter and almost half of these occur in the last five days of the quarter. In addition, we show that when firms report securitization gains sufficient to beat earnings thresholds, the securitization transactions are more likely to have occurred in the last five days of the quarter. We also document that the impact of securitizations on leverage is large and material for many firms. Our results suggest that window‐dressing the financial statements appears to be a valuable side‐benefit of engaging in securitization transactions.
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1 January 2009
Research Article|
January 01 2009
Do Managers Time Securitization Transactions to Obtain Accounting Benefits?
Patricia M. Dechow;
Patricia M. Dechow
University of California, Berkeley.
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Catherine Shakespear
Catherine Shakespear
University of Michigan.
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Online Issn: 1558-7967
Print Issn: 0001-4826
American Accounting Association
2009
The Accounting Review (2009) 84 (1): 99–132.
Citation
Patricia M. Dechow, Catherine Shakespear; Do Managers Time Securitization Transactions to Obtain Accounting Benefits?. The Accounting Review 1 January 2009; 84 (1): 99–132. https://doi.org/10.2308/accr.2009.84.1.99
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