Structured Debt Ratings: Evidence on Conflicts of Interest
Journal of Financial Economics, Vol. 116 (2014), 46-60
with Matthias Efing


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.

Additional Files

Powerpoint slides of a seminar presentation are available here.

The data used in the paper is available from the authors upon request.


The paper is discusses on the policy website under the title Corrupted credit ratings: Standard & Poor’s lawsuit and the evidence.