Taylor D. Nadauld
Department of Finance
Brigham Young University
Provo, Utah 84602
NBER Working Papers and Publications
|July 2016||The Liquidity Cost of Private Equity Investments: Evidence from Secondary Market Transactions|
with Berk A. Sensoy, Keith Vorkink, Michael S. Weisbach: w22404
An important cost of investing in private equity is the illiquidity of these investments. In response to this illiquidity, a secondary market for transacting stakes in private equity funds has developed. This paper uses proprietary data from a leading intermediary to understand the magnitude and determinants of transaction costs in this market. Most transactions occur at a discount to net asset value. Buyers average an annualized Public Market Equivalent (PME) of 1.023 compared to 0.974 for sellers, implying that buyers outperform sellers by a market-adjusted five percentage points annually. For the most common type of transaction, the sale of stakes in funds four to nine years old, the difference is smaller, about three percentage points. Both the discount to NAV and the difference in ...
|August 2012||Did Capital Requirements and Fair Value Accounting Spark Fire Sales in Distressed Mortgage-Backed Securities?|
with Craig B. Merrill, René M. Stulz, Shane Sherlund: w18270
Much attention has been paid to the large decreases in value of non-agency residential mortgage-backed securities (RMBS) during the financial crisis. Many observers have argued that the fall in prices was partly driven by decreased liquidity and fire sales. We investigate whether capital requirements and accounting rules at financial institutions contributed to the selling of RMBS at fire sale prices. For financial institutions subject to credit-sensitive capital requirements, capital requirements increase as an asset's credit becomes impaired. When accounting rules require such an asset's value to be marked-to-market and the fair value loss to be recognized in earnings, a capital-constrained firm can improve its capital position by selling the credit-impaired asset even if it has to acce...
|August 2011||Why Did U.S. Banks Invest in Highly-Rated Securitization Tranches?|
with Isil Erel, René M. Stulz: w17269
We estimate holdings of highly-rated tranches of mortgage securitizations of American deposit-taking banks ahead of the credit crisis and evaluate hypotheses that have been advanced to explain these holdings. We find that holdings of highly-rated tranches were economically trivial for the typical bank, but banks with greater holdings performed more poorly during the crisis. Though univariate comparisons show that banks with large trading books had greater holdings, the holdings of highly-rated tranches are not higher for banks with large trading books in regressions that control for bank size. The ratio of highly-rated tranches holdings to assets increases with bank assets, but not for banks with more than $50 billion of assets. This evidence is inconsistent with explanations for holding...
Published: “Why Did Holdings of High - Rated Securitization Tranches Differ So Much Across Banks?” with Isil Erel and Taylor Nadauld, The Review of Financial Studies, 2014, v27(2), 404-453.
|March 2011||Did Securitization Affect the Cost of Corporate Debt?|
with Michael S. Weisbach: w16849
This paper investigates whether the securitization of corporate bank loans had an impact on the price of corporate debt. Our results suggest that loan facilities that are subsequently securitized are associated with a 15 basis point lower spread than that of loans that are not subsequently securitized. To identify the particular role of securitization in loan pricing, we employ a difference in differences approach and consider loan characteristics that are associated with the likelihood of securitization. We document that Term Loan B facilities, facilities originated by banks that originate CLOs, and loans of B-Rated firms are securitized more frequently than other loans. Spreads on facilities estimated to be more likely to be subsequently securitized have lower spreads than otherwise simi...
Published: Nadauld, Taylor D. & Weisbach, Michael S., 2012. "Did securitization affect the cost of corporate debt?," Journal of Financial Economics, Elsevier, vol. 105(2), pages 332-352. citation courtesy of