A federal judge has ruled that a shareholder lawsuit against Countrywide Financial Corp. executives and directors should go to trial, rejecting several arguments by the troubled mortgage lender to dismiss the case.

The Public Employees Retirement System of Mississippi is among the lead plaintiffs in the case.

In a ruling issued Wednesday, U.S. District Judge Mariana R. Pfaelzer in Los Angeles sided with several public pension funds, finding that their witnesses' accounts of Countrywide's business practices were compelling.

In the ruling, Pfaelzer noted that several witnesses ready to testify for the funds gave persuasive accounts of Countrywide's business, including allegations that the company rewarded employees for boosting loan volume rather than for generating quality loans.

They claim Countrywide directors and officers failed to provide enough oversight of the lender and misled shareholders about the company's true financial state.