We test if issuers of asset- and mortgage-backed securities receive rating favors from agencies with which they maintain strong business relationships. Controlling for issuer fixed effects and a large set of credit risk determinants, we show that agencies publish better ratings for those issuers...

Minimum price variation rules (tick size rules) in the French stock market prior to 1999 provide a natural experiment on the role of transaction costs for financial price volatility. For stock prices above French francs (FF) 500, the minimal tick size for quotes increases from FF 0.1 to FF 1....