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- Title
Informational Efficiency in Securitization after Dodd-Frank.
- Authors
Flynn, Sean J; Ghent, Andra C; Tchistyi, Alexei
- Abstract
We analyze how Dodd-Frank-mandated risk retention affects the information investors extract from issuers' retention choices in the CMBS market. We show that the required retention level is both binding and stringent. Although this implies issuers cannot signal using the level of retention, we provide a model showing that signaling can occur by varying the retention structure. The model is consistent with spreads being empirically lower in deals with a purely first-loss retention structure. A stated concern of rulemakers is asymmetric information. However, we show that, post-crisis, the level of asymmetric information in this market is quite low.
- Subjects
RISK retention; COMMERCIAL mortgage-backed securities; DODD-Frank Wall Street Reform &; Consumer Protection Act; INFORMATION asymmetry; PRICES of securities
- Publication
Review of Financial Studies, 2020, Vol 33, Issue 11, p5131
- ISSN
0893-9454
- Publication type
Article
- DOI
10.1093/rfs/hhaa003