176 We provide evidence that competition between large (Moody’s and S&P) and smma ar kl l e(tD. WB ReSf ianndd t Kh aBtReAs)p Ce cRiAa lsl yc rMe aotoedsyr’ as tai nngd qDuBaRl iSt ya irnecsoennssi si ttievne ctioe smi na rtkheet Rs hMaBr Se mt r aonvcehmee) nwt sh oe nf ocnoemapneot itthi oe nr ; or af t Mi n og os dbye’ sc oomr eDwB oRrSs ei n(toe nn sai fvi ee sr a. gSeu, rfporri stihneg l ys,a mw ee fpi rnodv ti dh ea st Kb Be tRt eAr srhaot iwn sg st hoen oapvpeor sa igt ee ewf hf eecnt wc ohme np ectoi tni forno nwt ei tdh wMi ot ho dMyo’ so di nyt’ es n. Ks iBf iRe sA. Fs tuarnt dh ae rr dmsowr eh, e no ut hr erceosmu lpt se tsi thi voewp rt ehsastu rs emoafl tl hCeRi rAl as r gt eenr dp eteor sl oi sohs iegnh etrh, ee isrp ercaitai nl l yg imn otvheemceans tes oo ff sMmoaol dl Cy R’ s A. Ws , iht idl eo eSs&aPp ps el ye mt i gsh tt oe r brea tliensgs s st ae nn ds iat ri vdes ft oo r mt raa rnkcehte ss ht ha raet did not receive an additional rating of a small CRA. Ot eunrd rteos pu rl tosvai dl seobseht ot ewr rt ha tai tn sgms wa lhl eCnR dA es aal ri ne gs we ni tshi t imv eo rt eo pt ho ewpe or fwu el irs os uf ei srssu, ea rf si n; dt hi ne yg that corresponds to the downside effects of the issuer-pays revenue model. This finding also suggests that the risk of reputational damages is not necessarily an effective deterring mechanism for small CRAs who must deal with competitors who have high global presence in the rating industry. In addition, we find that dual ot or st ri ni pgllee rraatteedd ttrraanncchheess .rWe che ii vl ee abtettht eer sraamt i en gt si moen, ac vr ee dr ai tg er aftri onmg s CoRf At rsa, nccohme ps at rheadt received a rating of both a large and a small CRA (dual rated tranches) are found to be influenced by competitive pressures of CRAs and power of issuers. T( wh eh i Cc hR Ad ei npdeunsdtsr y oins amn ai rsks ue te rs- ph aa yr er)e, viennvuees t mo ros d euls. i Dn ge s pc ri teed itth irsart ei nvgesn uteo mmoadkeel icnovme sptemn es antti odne criesci oe ni vse edxbpye ac tCtRhAa t. Ht heen caes ,s ti hg ne ecdr erdaitti nr agtsi ns gh os hu ol du nl do st odl ee pl yernedp or ens et hnet the underlying credit risk of an RMBS, regardless of the competition in the rating market. However, we find that CRAs adjust their credit rating based on
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