Portfolio performance manipulation in collateralized loan obligations

• 成果类型: Article
• 署名作者: Loumioti, Maria; Vasvari, Florin P.
• 署名单位: University of Texas System; University of Texas Dallas; University of London; London Business School
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2018.09.003
• 发表日期: 2019
• 关键词: earnings management; securitization; real

摘要

We examine the discretionary activities that CLO managers engage in to pass monthly over-collateralization (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.