Abstract
We examine a quasi-experimental setting where a rating agency (S&P) is completely shut out of a large segment of the commercial mortgage-backed securities market for more than one year, following a procedural mistake. We exploit the fact that many tranches of CMBS deals have multiple ratings. Subsequent to the drop in its business volume (but not before), S&P assigned higher ratings than other raters, in particular for large deals and for deals from important issuers. The results suggest that issuing optimistic ratings is a strategy that can be used by a rating agency with a weak reputation to gain market share in a market with strong competition.
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