Asymmetric information and the securitization of SME loans

Using credit register data for loans to Italian firms we test the presence of asymmetric information in securitization market by looking at correlation between (risk-transfer) and default (accident) probability. We can disentangle adverse selection from moral hazard component many with multiple bank relationships. find that is widespread but confined weak relationships, indicating a strong relationship credible enough commitment monitor after securitization. Importantly, which securitize based on observables such it largely offsets (negative) effects information, rendering overall unconditional quality securitized significantly better than non-securitized ones. Thus, despite our results do not accord view credit-risk transfer leads lax standards.