Showing 1 - 10 of 252
reputation insures that, in equilibrium, ratings will reflect sound assessments of credit worthiness. There will always be an …
Persistent link: https://www.econbiz.de/10012458692
While major stock market indices are followed by large monetary investments, we document that membership decisions for the S&P 500 index have a nontrivial amount of discretion. We show that firms' purchases of S&P ratings appear to improve their chance of entering the index (but purchases of...
Persistent link: https://www.econbiz.de/10012660043
This paper explores the economic role credit rating agencies play in the corporate bond market. We consider three existing theories about multiple ratings: information production, rating shopping and regulatory certification. Using differences in rating composition, default prediction and credit...
Persistent link: https://www.econbiz.de/10012463319
Since June 2007, the creditworthiness of structured finance products has deteriorated rapidly. The number of downgrades in November 2007 alone exceeded 2,000 and many downgrades were severe, with 500 tranches downgraded more than 10 notches. Massive downgrades continued in 2008. More than 11,000...
Persistent link: https://www.econbiz.de/10012463604
larger fraction of naive investors in the market who take ratings at face value, or when CRA expected reputation costs are … lower. To the extent that in booms the fraction of naive investors is higher, and the reputation risk for CRAs of getting …
Persistent link: https://www.econbiz.de/10012463935
We analyze a model where investors use a credit rating to decide whether to finance a firm. The rating quality depends on unobservable effort exerted by a credit rating agency (CRA). We study optimal compensation schemes for the CRA when a planner, the firm, or investors order the rating. Rating...
Persistent link: https://www.econbiz.de/10012459738
in both these arrangements credit ratings have value in equilibrium and how reputation insures that, in equilibrium …
Persistent link: https://www.econbiz.de/10014322691
and lower their ambitions when rejected. We derive the comparative statics with respect to the sellers' initial reputation …
Persistent link: https://www.econbiz.de/10012464190
We show that a June 2002 reform in Morningstar's mutual fund rating methodology led to substantial drop in the profitability of momentum-related asset pricing factors. Before the reform, funds pursuing the same investment style had correlated ratings heavily influenced by recent style...
Persistent link: https://www.econbiz.de/10012496178
We study the effects of the first-ever ratings for corporate securities. In 1909, John Moody published a book that partitioned the majority of listed railroad bonds into letter-graded ratings based on his assessments of their credit risk. These ratings had no regulatory implications and were...
Persistent link: https://www.econbiz.de/10014247986