Vivian van Breemen

119 This table reports ordered logit regressions of rating discrepancy between Moody’s and S&P on the underlying complexity components, 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. We use the following interaction terms to test the impact of business cycles on rating discrepancy: ’Pre Dotcom’ equal 1 if a security is issued before 2001, ‘Dotcom’ equals 1 if a security is issued in 2001, ‘Pre Global Recession’ equals 1 if a security is issued between 2002-2007’, and ’Global Recession’ equals 1 if a security is issued after 2007. All other independent variables are defined in Table 3.2 of the paper. White (1980) heteroskedasticity-adjusted t-statistics in parentheses and (*), (**), (***) denote significance levels of 10%, 5% and 1%, respectively. Table I: The impact of business cycles on split credit ratings. an ordered logit regression of rating discrepancy for split credit rating only on underlying CLO complexity components (1) (2) (3) (4) (5) (6) Complexity Indicators Tranche Count -0.09* -0.13 -0.09* -0.09 * -0.10 * -0.10 ** (-1.76) (-0.73) (-1.82) (-1.88) (-1.92) (-2.05) Log Tranche Size -0.002 0.02 0.02 0.04 0.02 -0.04 (-0.01) (0.08) (0.08) (0.14) (0.12) (-0.21) Capital Allocation 2.02* * 1.99 ** 1.82* 2.03 ** 2.85 ** -1.61 (2.02) (1.99) (1.77) (2.06) (2.56) (-0.87) Tranche Count*Global Recession (-0-0.8.118) Tranche Count*Dotcom ( 10. 3. 437) Tranche Count*Pre Dotcom (0 0 .2 .0 2 5 ) Appendices Appendix I. Supplementary Table I for Chapter 3 Chapter 3 - Security Design and Credit Rating Risk

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