The author studies a natural experiment in commercial mortgage-backed securities (CMBS) where some special servicers changed owners (treatment group) from 2009 to 2010 but not others (placebo group). The ownership change linked sellers (special servicers who liquidate CMBS assets on behalf of bondholders) and buyers (new owners), presenting a classic self-dealing conflict. Average loss rates for liquidations are 11 percentage points higher (implying additional losses of $3.2 billion for bondholders) after treated special servicers changed owners, but not for the placebo group. The author provides the first direct measure of self-dealing that links buyers and sellers in securities markets in the United States.
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