Off-Balance Sheet Arrangements and Company Performance during the Recent Financial Crisis

We investigate whether company performance during the 2007-2009 financial crisis is related to the use of off-balance sheet arrangements (OBSAs), specifically those related to transferred financial assets and variable interest entities. Using propensity-score matching for a sample of non-bank companies, we show that the use of these OBSAs is associated with almost 10 percent lower buy-and-hold returns during the crisis. We do not find a significant negative relation for a placebo test one year before the crisis. In addition, we find no relation for companies that use only on-balance sheet accounting.