Structured debt ratings: Evidence on conflicts of interest

Matthias Efing and Harald Hau

Journal of Financial Economics, 2015, vol. 116, issue 1, 46-60

Abstract: We test if issuers of asset- and mortgage-backed securities receive rating favors from agencies with which they maintain strong business relationships. Controlling for issuer fixed effects and a large set of credit risk determinants, we show that agencies publish better ratings for those issuers that provide them with more bilateral securitization business. Such rating favors are larger for very complex structured debt deals and for deals issued during the credit boom period. Our analysis is based on a new deal-level rating statistic that accounts for the full distribution of tranche ratings below the AAA cut-off point of a structured debt deal.

Keywords: Credit ratings; Ratings inflation; Conflict of interest; Structured debt (search for similar items in EconPapers)
JEL-codes: G01 G10 G24 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (38)

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Related works:
Working Paper: Structured Debt Ratings: Evidence on Conflicts of Interest (2013)
Working Paper: Structured Debt Ratings: Evidence on Conflicts of Interest (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:116:y:2015:i:1:p:46-60

DOI: 10.1016/j.jfineco.2014.11.009

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