Reputation, Information, and Herding in Credit Ratings: Evidence from CMBS

Xudong An (), Larry Cordell () and Joseph B. Nichols ()
Additional contact information
Xudong An: Federal Reserve Bank of Philadelphia
Larry Cordell: Federal Reserve Bank of Philadelphia
Joseph B. Nichols: Federal Reserve Board

The Journal of Real Estate Finance and Economics, 2020, vol. 61, issue 3, No 6, 476-504

Abstract: Abstract We find strong evidence of herding behavior among credit rating agencies (CRAs) in the CMBS market. CRAs are more likely to change their rating if another CRA had changed its rating on the same bond in the previous period. CRAs tend to adjust their ratings to make them converge with those of other CRAs when there is rating disagreement in the previous period. CRA reduced their herding behavior during the financial crisis and herding after the crisis was still lower than it was pre-crisis. We also find evidence that herding in corporate bonds is largely limited to below-investment grade companies. In contrast, we see evidence of herding in CMBS in both high and low rated tranches. These results are consistent with predictions from a theoretical model where CRAs use both public and private information in determining their credit ratings.

Keywords: Credit rating; CMBS; Herding (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11146-019-09701-3 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jrefec:v:61:y:2020:i:3:d:10.1007_s11146-019-09701-3

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11146/PS2

DOI: 10.1007/s11146-019-09701-3

Access Statistics for this article

The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

More articles in The Journal of Real Estate Finance and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().