Suchergebnisse

We compare key CDO assumptions from two departments within the same rating agency but with different financial incentives. Assumptions made by the ratings division are more favorable than those by the surveillance department. The differences are not explained by collateral switching during the ramp-up period, a long time gap between reports, nor the collapse of the CDO market in 2007 Additionally, CDOs rated with more favorable assumptions by the ratings group were more likely to be subsequently downgraded. As the useful signals from the surveillance group were seemingly ignored, these findings suggest rating agencies bias towards high ratings.

AbstractA unique governance structure for mutual funds is unitary board—one board overseeing all funds in the entire family. We find strong evidence for unitary board as an effective governance mechanism. Funds with unitary boards are associated with lower fees, are more likely to pass the economies of scale benefits to investors, are less likely to be involved in trading scandals, and rank higher on stewardship. In contrast, funds with larger or more independent boards charge higher fees and rank lower on stewardship. Our findings indicate that unitary boards of small size, rather than independent boards, may be more beneficial to fund shareholders.