Author:
Bae Kee-Hong,Kang Jun-Koo,Wang Jin
Abstract
AbstractWe examine two competing views regarding the impact of competition among credit rating agencies on rating quality: the view that rating agencies do not sacrifice their reputation by inflating firm ratings, and the view that competition among rating agencies arising from the conflict of interest inherent in an “issuer pay” model creates pressure to inflate ratings. Using Fitch’s market share as a measure of competition among rating agencies and controlling for the endogeneity problem caused by unobservable industry effects, we find no relation between Fitch’s market share and ratings, suggesting that competition does not lead to rating inflation.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics,Finance,Accounting
Cited by
53 articles.
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