Structured Debt Ratings: Evidence on Conflicts of Interest | Zendy

Matthias Efing | Zendy; Harald Hau | Zendy

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Structured Debt Ratings: Evidence on Conflicts of Interest

Author(s) -

Matthias Efing,

Harald Hau

Publication year - 2013

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.2253970

Subject(s) - issuer , credit rating , tranche , debt , collateral , business , bond credit rating , asset (computer security) , credit enhancement , structured finance , actuarial science , credit risk , financial system , credit reference , finance , economics , financial crisis , computer security , computer science , macroeconomics

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.

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