Does skin-in-the-game affect security performance?

• 成果类型: Article
• 署名作者: Ashcraft, Adam B.; Gooriah, Kunal; Kermani, Amir
• 署名单位: Bank of America Corporation; University of California System; University of California Berkeley; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.04.009
• 发表日期: 2019
• 页码: 333-354
• 关键词: COLLATERALIZED DEBT OBLIGATIONS; Risk retention; asymmetric information

摘要

This paper documents that complex financial innovations like collateralized debt obligations (CDOs) enabled informed parties in the commercial mortgage-backed securitization pipeline to reduce their skin-in-the-game in a way not observable to other market participants. This reduction in first-loss security retention significantly impacted the probability that more senior tranches ultimately defaulted. We show that this performance is entirely driven by the amount of first-loss sold to (affiliated) CDOs within 12 months of the commercial mortgage-backed securities (CMBS) deal. Our result is robust to using the differential access of first-loss investors to CDO funding as an instrument to identify exogenous variations in the retention of first-loss securities. (C) 2019 Published by Elsevier B.V.