Resumen de Complex securities and underwriter reputation: : Do reputable underwriters produce better securities?

John Griffin, Richard Lowery, Alessio Saretto

• Conventional wisdom suggests that high-reputation banks will generally produce good securities to maintain their long-run reputation. We show with a simple model that, when securities are complex a high-reputation bank may produce assets that underperform during market downturns. We examine this possibility using a unique sample of $10.1 trillion of CLO, MBS, ABS, and CDOs. Contrary to the conventional view, securities issued by more reputable banks did not outperform but, rather, had higher proportions of capital in default.