263 This table reports ordered logit regressions of the risk retention methods on the credit rating at issuance, controlled for security-design characteristics as well as year and security type controls. ‘Credit rating’ represents the average credit rating of Moody’s, S&P, Fitch, DBRS, and KBRA converted into a numerical value by setting 1 for Aaa, 2 for Aa1, 3 for Aa2, and so on. ‘Risk Retention Methods’ is a categorical variable indicating the form in which the 5% material net economic interest is obtained, which includes the ‘VES’, ‘OBS’, ‘FLT’ or ‘FLE’ method. The FLT method is the omitted variable. All other control variables are defined in Table 6.2. Z-statistics are reported in parentheses in parentheses and (*), (**), (***) denote significance levels of 10%, 5% and 1%, respectively. Table 6.5: Ordered logit regressions of risk retention methods on credit ratings (tranche-level analysis). Panel A – Full tranche-level sample and sorted by originators’ size Full sample Frequent Originator Infrequent Originator (1) (2) (3) VES 0.69*** 0.70*** 0.82*** (6.18) (4.04) (5.30) OBS -0.20 -0.28* 0.03 (-1.63) (-1.67) (0.17) FLE 0.45* 1.13*** -0.56 (1.74) (3.17) (-1.44) Subordination Level -0.35** -0.59*** 0.45* (-2.39) (-3.03) (1.84) No. of Tranches -0.08*** -0.11*** -0.08*** (-4.06) (-3.45) (-2.66) Log Tranche Value -0.94*** -1.00*** -0.93*** (-26.79) (-20.91) (-17.30) Log Transaction Value 0.72*** 0.91*** 0.51*** (12.22) (10.76) (5.51) Frequent Originator - (0- .54. 31 *3*)* Rating Discrepancy 0.27*** 0.25*** 0.29*** (9.17) (6.32) (6.24) Year Y Y Y Security Type Y Y Y Observations 2,157 1,171 986 Pseudo R2 0.121 0.132 0.126 Chapter 6 - Risk Retention in the European Securitization Market
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