Risk Retention Rules and the Issuance of Commercial Mortgage Backed Securities

Sumit Agarwal, Brent W. Ambrose, Yildiray Yildirim, Jian Zhang

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


We study the impact of the risk retention rule - requiring 5% of underlying credit risk for commercial mortgage backed securities - on commercial real estate markets. Since the primary objective of this rule is for the deal sponsors to have skin in the game, we expect that underwriting standards should tighten following the implementation of the rule. Consistent with this notion, we find the reform led to a decrease in price premium and probability of rating shopping by the sponsors, as well as longer time-to-securitization and lower default probability. We also show that the Dodd-Frank risk retention rule can impact banks’ credit supply by curtailing credit growth. As a result, we provide novel evidence on the effect of the risk retention rule on underwriters most exposed to the regulation.

Original languageEnglish (US)
JournalJournal of Real Estate Finance and Economics
StateAccepted/In press - 2021

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Urban Studies


Dive into the research topics of 'Risk Retention Rules and the Issuance of Commercial Mortgage Backed Securities'. Together they form a unique fingerprint.

Cite this