234 Figure I(d), Appendix I). This suggests that the retainer takes the bulk of the first laorsrseeasr,s b, fuotr bh ea as rnaon ci ensc,efnotrievcel ot os umr eosn, isteoirz uarnedomf aasnsaegt se) tihnealno aonp tpi mo oall (me .agn. , nme ra no na gc ee tthraenrcehtea.iner assumes that total losses will anyway exceed the size of the equity Iann ds ui mn v, ecsotnosr i di se pr ienrgf et chte f eo xr pVeEc St e, dc l roesteul yr nasl ,i gi nnceedn ftoi vreOs Ba lSi ,g rnamt heenrt dbievtewr ge ee nn t rfeot ra iFnLeEr and very divergent for FLT. Yet, as the retainer takes the first losses, the incentives to securitize junk may be limited and thus the FLT could also be seen as a signal of confidence in the quality of the pool of the retainer to the market. Ts chrius t ianrigz ue mi fe nt thaet i odni f f ae sr e wn te lrl i saks rperteevni ot iuosn l mi t eertahtoudr es hi nads e el edd aul isg nt o t he me pi ni rtiecrael sl yt bt heat wt teheendti hf fee rt ewnot sr iestks roef t pe an rt ti oi ens mi ne at hsoedc su railtl iozwa tei do nb yi nr ea gn uel qa tui ao lnmd ao nnnoet rc. oWnet rai rbguut ee to identical risk profiles and incentives and, as a result, are likely to impact the credit rating and pricing of securitization tranches at issuance. Hence, we expect to find significant differences in credit ratings and pricing for tranches with different risk retention methods. 6.3 Sample construction and empirical strategy The primary data source for this study is Bloomberg. From Bloomberg, we oa nb dt a isnoel dd t ihne tchoem Ep ul ertoepuena inv eUr snei oonf 5b, e2t3w4eseenc u2r0i t1i z1a tai no nd t2r a0n2c1h. eTs ht eh act uatr- eo fifs sduaet de is 2011 as this is the year in which the rule came into force. In order to avoid problems with possible misclassification of deals, we have eliminated tranches wt r ai tnhc hmeiss)s, i na ng dc rt he do iste rwa ti itnhgo ui nt fionrf mo ramt iaotni o n( 1o, 1n4 2t h et r ar insckh reest)e, ni nt icoonmmp el et theo dd e(a1l,s9 2( 87
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