Journal of Financial Economics Vol. 135 No. 2 2020
Reputations and credit ratings: Evidence from commercial mortgage-backed securities
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 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 suggest that an agency can regain market share after suffering reputational damage by issuing optimistic ratings.
- DOI
- 10.1016/j.jfineco.2019.06.001
- Volume
- 135
- Issue
- 2
- Pages
- 425-444
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib