Reputations and credit ratings: evidence from commercial mortgage-backed securities

Ramin Baghai and Bo Becker

No 12648, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: How do changes in a rating agency’s reputation affect the ratings market? We study the dynamics of credit ratings after Standard & Poor’s (S&P) was shut out of a large segment of the commercial mortgage-backed securities (CMBS) ratings market following a procedural mistake. Exploiting the fact that most CMBS securities have ratings from multiple agencies, we show that S&P subsequently eased its standards compared to other raters. This coincided with a partial recovery in the number of deals S&P was hired to rate. Our findings are consistent with the view that an agency can regain market share after suffering reputational damage by issuing more optimistic ratings.

Keywords: Credit ratings; Reputation; Competition; Information quality; Commercial mortgage-backed securities (search for similar items in EconPapers)
JEL-codes: G20 G24 G28 (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (4)

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Journal Article: Reputations and credit ratings: Evidence from commercial mortgage-backed securities (2020)
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