132 The primary reason cited for CRAs to inflate credit ratings for RMBS is the way that rt he va et nt huee ri es vgeennue er aotfe Cd RbAy sCiRs An so: t tgheen iesrsauteerd- pf raoyms rienvveens ut oerms bo ud te rl .aTt hh ei sr mf r oo dme li sms ue ea rnss, ns eoctuwriitthi esst ai snsdui ne dg bt hy atth ae ts et hi ses us ae mr s ei nt iomr de etrh feo rC Ri nAv’ es sttaosrks ti so rt oe l yo bojne ct thi ev seel yr ar at itnegtsh. e 40 Icto mn si eg qh ut et hnet lrye, fCo Rr eA bs emi ni g thht ehias vs eu earn’ s i on wc enn ti ni vtee rteos ct at ot e sr erl ae tcitntghse t bo eitstseur erra’ st i nd ge smaanndd, (see, e.g., Griffin et al., 2013; He et al., 2015; Zhou et al., 2017; Flynn and Ghent, 2a r0e1 e8v) e. En mmpoi rr ei c lai lk setl uy dt oi e os fi fnevr ebs et itgt ea rt i nr agt ti nh ge sCiRf At hrea itsi ns ug eprr iosc ae bs sl ee tmo pbhr ai ns gi z, eo rt hpaot sCsRi bAl ys remove, future deals to the CRAs (see e.g., He et al., 2012). Furthermore, CRAs tend to offer better ratings when competition in the CRA market intensifies. Tt hhee rCeR iAs ma wa reklel -te. sFtoarb el i xs ahme dp lset ,r as tnudd iyni ntgh et hl ei t eernattruyr oe f pneer wt a iCnRi nAgs tion ct oh me sptertui tcitounr ei nd finance market, Flynn and Ghent (2018) find that small CRAs assign better rr aa tt ii nn gg ss , boyf tsemn ablyl esreCv Re rAasl ni soat csht reas t, et hg ya nt ol awr gi ne rbCuRs iAnse. sTs hf reoy mc olna cr gl uedr eCtRhAa st . tShiembi el at rt el yr, in their study of the Canadian bond market between 1996 and 2012, Bae et ar al . t i(n2g0s1w9 )h ef inn dS &t hP a’ st cDo BmRpSe tai tsisoi gn ni ss hmi go hr ee rf. aTvhoer af bi nl ed, i nbgust ol ef sBs e icnkfeorr ma nadt i vMe i, l bc roeudr int (2011) complement those of Bae et al. (2019), as they find that an increase in competition from Fitch results in lower rating quality assigned by the larger CRAs. Specifically, Becker and Milbourn find that an increase in Fitch’s market share is predicted to increase the average credit rating of large CRAs. Morkoetter et al. (2017), however, find no evidence that CRAs assign biased ratings to tranches in order to gain market share. 40T di h s B i t s e r i f w b o a u re s te t td h h ee to i i nn o v t t r e h o s e d t r o u i r c n - t p v i e o a s y n t s o o m r f s o t w h d e e h lo p . h W d o o i t t o n h c o t o t h p n e i e e i e r n , d t i r n t o o v d e p u s a c t y o ti r o f s o n r p o t a h f i d e th c f e o o r p s t h a o o b f t o o th c o o e k p b p i o e r o r o , k d t . h u ec ecdr ebdyi tar aCtRi nAg tshiant tphreobvoi doekdc roautlidn gbse.
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