Affiliation:
1. Indiana University , USA
2. University of Oxford , UK
Abstract
Abstract
Accurate credit ratings are important for both investors and regulators. We demonstrate that the market for credit risk provides an important source of discipline for credit rating agencies (CRAs). We examine a model in which a CRA’s rating is followed by a market for credit risk that provides a public signal – the price. More informative trading increases the CRA’s incentives to be accurate by making rating errors more transparent. We show that this source of discipline is (a) robust to moral hazard, multiple CRAs, and connected primary and secondary markets and (b) specific to the market for credit risk.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics,Finance,Accounting
Reference58 articles.
1. Rumor has it: Sensationalism in financial media;Ahern,;Review of Financial Studies,2015
2. Structural shifts in credit rating standards;Alp,;Journal of Finance,2013
3. The relevance of credit ratings in transparent bond markets;Badoer,;Review of Financial Studies,2019
4. Reputations and credit ratings: evidence from commercial mortgage-backed securities;Baghai,;Journal of Financial Economics,2020
5. Have rating agencies become more conservative? Implications for capital structure and debt pricing;Baghai,;Journal of Finance,2014
Cited by
5 articles.
订阅此论文施引文献
订阅此论文施引文献，注册后可以免费订阅5篇论文的施引文献，订阅后可以查看论文全部施引文献