Portfolio performance manipulation in collateralized loan obligations |
| |
Authors: | Maria Loumioti Florin P Vasvari |
| |
Institution: | 1. Naveen Jindal School of Management, The University of Texas, Dallas 800W Campbell Road, Richardson, TX 75080, USA;2. London Business School, Regents Park, London, NW1 4SA United Kingdom |
| |
Abstract: | We examine the discretionary activities that CLO managers engage in to pass monthly overcollateralization (OC) tests. These tests require a CLO's loan portfolio value, scaled by the CLO notes’ principal balance, to be above a certain threshold. Using CLOs’ granular disclosures, we develop model-free estimates for discretionary loan fair valuation and transaction-based proxies for strategic loan trading. We find a positive association between these discretionary activities and the probability of avoiding an OC test violation. This association varies predictably with junior noteholders’ influence and CLO market conditions. Strategic trading—but not discretionary fair valuation—relates to worse future CLO performance. |
| |
Keywords: | Corresponding author at: Department of Accounting Sainsbury Building Room 214 London NW1 4SA United Kingdom Collateralized loan obligation CLO Securitization Managerial discretion Loan fair valuation Strategic loan trading M41 G23 |
本文献已被 ScienceDirect 等数据库收录! |
|