101 Panel A: Full Sample (1) (2) (3) (4) (5) (6) (7) (8) Complexity Indicators Tranche Count 0.04* ** 0.00 0.07* ** 0.02 0.04* ** 0.04* ** 0.04* ** (3.72) (-0.01) (6.28) (1.42) (3.62) (3.72) (3.18) Tranche Count*Post (60.0.166)*** Log Tranche Size 0.29* ** 0.24* ** 0.35* ** 0.3* ** 0.33* ** 0.29* ** 0.29* ** (7.19) (6.67) (8.33) (7.54) (7.68) (7.15) (7.22) Log Tranche Size*Post (-2-0.4.134)** Capital Allocation 2.38* ** 2.58* ** 2.64* ** 2.35* ** 2.40* ** 2.35* ** 2.40* ** (9.08) (9.87) (9.67) (8.91) (9.09) (8.09) (8.98) Capital Allocation *Post ( 00. 2. 152) TABLE 3.2 – Continued Panel A: Full Sample Control Variables Euro Market -1.87*** -1.84*** -1.81*** -1.76*** -1.82*** -1.86*** -1.87*** -1.79*** (-26.1) (-26.2) (-25.3) (-24.7) (-25.2) (-25.9) (-26.2) (-24.0) Euro Market* -0.58** This table reports logit regressions of the underlying CLO complexity components on the number of ratings, controlled for deal-level characteristics, issuer characteristics and market conditions. We use the full sample of CLO securities issued in November 1996 up to May 2013, the year in which multiple ratings became mandatory in Europe. The sample is based on securities that received a rating from Moody’s and/or S&P as reported on Bloomberg. The dependent variable is the dichotomous variable ‘Number of Ratings’ that equals 1 if, at issuance, a security had two ratings and zero if it had only one rating. ‘Tranche Count’ stands for the total number of tranches in the CLO of which the security is a part of, ‘Log Tranche Size’ is the natural logarithm of the face value of the security at issuance. ‘Capital Allocation' represents the level of internal credit enhancement supporting such a security within a CLO, measured as the ratio of all tranches subordinated to the tranche in question divided by the total face value of the CLO. ‘Euro Market’ is a dummy variable of 1 when the security is issued and sold in the Euro market, and zero if it is issued and sold in the US market. ‘Top Ten Issuer’ is a dummy that equals 1 if the issuer is among the top 10% of issuers in the global CLOs market measured by size, and zero otherwise. ‘Log Transaction Value’ is the natural logarithm of the transaction value of the deal at issuance. ‘Credit Ratings’ are a set of dummy variables to indicate the credit rating of a security at issuance by Moody’s and/or S&P, after we convert the ratings into a numerical value by setting 1 for Aaa (AAA), 2 for Aa1 (AA+), 3 for Aa2 (Aa), and so on. ‘Year Controls’ represent the year of issuance, which equals a dummy of 1 that corresponds to the year the CLO was issued, zero otherwise. ‘Post’ is introduced in columns (5) to (8) and used as an interaction term that equals 1 if a security is issued after 2007. We further test if the results are sensitive to modifications by rotationally removing complexity indicators in columns (2) to (4). White (1980) heteroskedasticityadjusted t-statistics in parentheses and (*), (**), (***) denote significance levels of 10%, 5% and 1%, respectively. Panel B presents results for AAA tranches only; Panel C for non-AAA tranches only. Table 3.2: Logit regressions of CLO complexity characteristics on the number of credit ratings reported at issuance. Chapter 3 - Security Design and Credit Rating Risk
RkJQdWJsaXNoZXIy MTk4NDMw