منابع مشابه
Rating agencies in the face of regulation
Massive downgrading and defaults during the 2008/2009 financial crisis have led politicians, regulators, and the popular press to conclude that the rating agencies’ business model is fundamentally flawed. The popular argument goes as follows. Issuers of securities naturally prefer higher ratings for their issues, because these reduce their cost of capital. Because the issuer pays the rating age...
متن کاملRating Agencies in the Face of Regulation: Rating Ination and Regulatory Arbitrage
This paper develops a rational expectations framework to analyze how rating agencies incentives are altered when ratings are used for regulatory purposes such as bank capital requirements. Regulations of this kind imply that the AAA label of a security is valuable to a regulated investor independent of the information it provides about the riskiness of the securitys underlying cash ows. Our ...
متن کاملThe Optimal Regulation of Credit Rating Agencies
Credit rating agencies (CRAs) very often have been criticized for announcing inaccurate credit ratings and are suspected of being exposed to conicts of interest. Despite these objections CRAs remained largely unregulated. Based on Pagano & Immordino (2007), we study the optimal regulation of CRAs in a model where rating quality is unobservable and enforcing regulation is costly. The model show...
متن کاملInformational Effects of Regulation FD: Evidence from Rating Agencies
This paper studies changes in the information environment brought about by Regulation Fair Disclosure (FD), which was implemented on October 23, 2000. FD now prohibits U.S. public companies from making selective, non-public disclosures to favored analysts and portfolio managers. FD, however, has a number of exclusions, one of which still allows disclosure of nonpublic information to credit rati...
متن کاملRATING AGENCIES Harold Cole
For decades credit rating agencies were viewed as trusted arbiters of creditworthiness and their ratings as important tools for managing risk. The common narrative is that the value of ratings was compromised by the evolution of the industry to a form where issuers pay for ratings. In this paper we show how credit ratings have value in equilibrium and how reputation insures that, in equilibrium...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2012
ISSN: 1556-5068
DOI: 10.2139/ssrn.1540099