Vivian van Breemen

109 This table reports ordered logit regressions of the underlying complexity components on the rating discrepancy between Moody’s and S&P, controlled for deal-level characteristics, issuer characteristics and market conditions. This sample is based on securities that received a split rating from Moody’s and/or S&P as reported on Bloomberg between 1996 and 2013, the year in which multiple ratings became mandatory in Europe. The dependent variable ‘Rating Discrepancy’ stands for the numerical difference between credit ratings of S&P and Moody’s when their ratings are converted to numerical equivalents, for each security that has two ratings. ‘Tranche Count’ stands for the total number of tranches in the CLO deal 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 deal, measured as the ratio of all tranches subordinated to the tranche in question divided by the total face value of the CLO. ‘Post’ is introduced in columns (4) to (6) and used as an indicator interaction term that equals 1 if a security is issued after 2007. All other independent variables are defined in Table 3.2. White (1980) heteroskedasticity-adjusted t-statistics in parentheses and (*), (**), (***) denote significance levels of 10%, 5% and 1%, respectively. Table 3.4: Ordered logit regressions of CLO complexity characteristics on rating discrepancy for split credit ratings only. (1) (2) (3) (4) (5) (6) Complexity Indicators Tranche Count -0.10* * -0.07* -0.09* -0.09* -0.09* -0.09 * (-2.52) (-1.89) (-1.88) (-1.73) (-1.89) (-1.76) Tranche Count*Post (-0-0.7.187) Log Tranche Size 0.31* * 0.02 -0.00 0.03 0.02 (2.54) (0.10) (-0.02) (0.14) (0.11) Log Tranche Size*Post (-0-0.1.075) Capital Allocation 2.00* * 2.02* * 2.01* * 2.43 ** (2.04) (2.03) (2.07) (2.49) Capital Allocation*Post (-2-4.0.463)** Chapter 3 - Security Design and Credit Rating Risk

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