Fees, Reputation, and Information Production in the Credit Rating Industry
نویسندگان
چکیده
We compare a credit rating agency’s incentives to acquire costly information when it is only paid for giving favorable ratings the corresponding agency up-front, i.e., irrespective of assigned. show that, in presence moral hazard, contingent fees provide stronger dynamic than up-front and may induce higher social welfare. When fee structure chosen by agency, arise as an equilibrium outcome, line with way market actually works. (JEL D21, D82, D83, G24)
منابع مشابه
Credit card interchange fees ∗
We build a model of credit card pricing that explicitly takes into account credit functionality. We show that a monopoly card network always selects an interchange fee that exceeds the level that maximizes consumer surplus. If regulators only care about consumer surplus, a conservative regulatory approach is to cap interchange fees based on retailers’ net avoided costs from not having to provid...
متن کاملAsymmetric Information, Reputation, and Welfare in Online Credit Markets
This paper studies the impact of reputation/feedback systems on the operation of online credit markets using data from Prosper.com. The ability of lenders to recover their loans is one of the main concerns in these markets, where the problems of asymmetric information are two-fold. On the one hand, borrowers differ in their inherent risks; on the other hand, additional incentives are necessary ...
متن کاملPredicting Credit Rating and Credit Rating Changes: A New Approach
In this paper, we propose a hazard rate model for studying credit rating and credit rating changes. Theoretically the hazard rate model is more appropriate than the previous static models. Yet it is difficult to estimate hazard rate model, especially when the covariates are time-varying. This paper extends the results of Shumway(2001) and shows that a multiple-state hazard rate model can be est...
متن کاملConnecting Credit Grantors and Credit Requestors: Towards the Electronic Exchange of Rating-Relevant Information
Before granting new credits, banks must gather qualitative and quantitative information about their prospective customers in order to start a rating process which allows them to assess the credit requestor’s risk class. Driven by intense structural changes within the financial industry and as a result of the specifications of the Basle II accord with regard to the rating process, banks are curr...
متن کاملCredit Rating Changes, Information Acquisition and Stock Price Informativeness
How do rating changes affect investor behavior and price informativeness? In a model with endogenous information acquisition and investors with limited attention, we show that the returns to information and the informativeness of the price system increase after a downgrade, but should not experience a significant change after an upgrade. Using a sample of U.S. publicly traded firms that experie...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: American Economic Journal: Microeconomics
سال: 2021
ISSN: ['1945-7669', '1945-7685']
DOI: https://doi.org/10.1257/mic.20180170