280 7.1.2 Challenges in the securitization market Securitization literature univocally accentuate the undesirable consequences of the ‘issuer pays’ business model and ‘winner-takes-most’ fee models on the quality of credit ratings.86 Despite the implementation of several rules and rheagvuel astei roinosu st oc iomn sperqo uv ee nt chees mf oarr ktehte, tqhueaslei t ym oo df eclrse da ri te rsat ti li ln igns . pFl aocre eaxna dm spel ee,mo ut or study shows that the complexity of a security’s design is one of the elements that ionf f Cl uReAnsc.eWt heef irnadt i nt hgast ,heovpepni nagf tbe re ht ha vei og rl oobfa li sfsi nu ea rnsc iaanl dc rri saitsi n, igs scuaet er rs i na rgeblei khealvyi ot or dt hi sapt l ai sys ur ea rt isn gt e snhdo pt op i dn igf f ebreehnatvi ai ot er fboert wmeoerne Cc Ro mA sp lwe xh es ne c du er iat li iensg. Ww ei t ha l sc oo ms hp ol ewx ss eucgug reist ti es st ,hea.tgi. s, st uh ee yr s pmr ei gf ehrt faa vMoor ot dh ye ’ Cs RoAv e(ri . ea.n, MSo&oPd yr a’ st)i nt hg a(tsiesewCi hl l ai npgt et ro 3p )r .o Tv ihdi es more optimistic ratings for deals that are engineered in a complex way. These findings suggest that the downside effects of the ‘issuer pays’ business model ss taigl la sc ei oeums l tyo sbeee kp rt eo s oe pn tt i. mI ni zees st he ne icre ,r iws kh-erne tbuur ny i nl egv ec rl se, driat trhaet ri ntghsa, ni s lsouoekr isnsge seoml etl oy tcoo nt hs ter uucnt dae rdleyai nl , gt hcer ye dsiet eqmu at loi tcyo on fs ttrhuec ts emc uo rr ei t ys.i zTahbel es tarma ne s iasc tt irounes wi nh el onwi es rs urei srks environments (see Chapter 5). Imn arreksepto bnys, e atmo tohnegsset doot hwenrssi, di emepf fl ee mc t se,nrtei gn ug l ar ut ol er ss ha anvde rt er igeudl at ot i oi mn sp rt oh va et tshoeu gr ahtti nt og sottihmeurslate the entrance of smaller and newer CRAs. Unfortunately, but in line with 87, we show that a regulatory environment designed to encourage new CRAs to enter the market does not necessarily solve the problem of misleading credit ratings assigned by the prevailing market players. For example, we find that both 86 See, e.g., He et al. (2016), Sangiorgi and Spatt (2017) and Zhou et al. (2017). 87 See, e.g., Bae et al. (2019) and Becker and Milbourn (2011).
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