The purpose of this study is to examine the market risk perception as represented by launch spreads of accounting disclosures on newly issued private label Mortgage-Backed Securities (MBS). The study specifically focuses on SFAS 140 disclosures. Regressing the MBS spreads before and after implementation of SFAS 140 on disclosure variables and control variables suggest that the disclosures provide relevant information that is essential to assess the risk of newly issued MBS to market participants. The results also suggest that the degree of impact varies for different variables. We conclude that the disclosures required by SFAS 140 are value relevant to investors, provide useful information in evaluating risk and result in reduced spreads on newly issued private label MBS.
Disclosures, SFAS 140, Securitization, Mortgage-Backed Securities (MBS), Fixed Income