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Ratings Shopping and Asset Complexity : A Theory of Ratings Inflation
Skreta, Vasiliki - 2010
Many identify inflated credit ratings as one contributor to the recent financial market turmoil. We develop an equilibrium model of the market for ratings and use it to examine possible origins of and cures for ratings inflation. In the model, asset issuers can shop for ratings -- observe...
Persistent link: https://www.econbiz.de/10012757842
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The Credit Rating Crisis
Benmelech, Efraim - 2010
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/10013152566
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Efficient Bailouts?
Bianchi, Javier - 2012
We develop a quantitative equilibrium model of financial crises to assess the interaction between ex-post interventions in credit markets and the buildup of risk ex ante. During a systemic crisis, bailouts relax balance sheet constraints and mitigate the severity of the recession. Ex ante, the...
Persistent link: https://www.econbiz.de/10013096860
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Rating Agencies
Cole, Harold L. - 2014
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...
Persistent link: https://www.econbiz.de/10013056865
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Who Should Pay for Credit Ratings and How?
Kashyap, Anil K. - 2013
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/10013084208
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The Credit Ratings Game
Bolton, Patrick - 2010
The spectacular failure of top-rated structured finance products has brought renewed attention to the conflicts of interest of Credit Rating Agencies (CRAs). We model both the CRA conflict of understating credit risk to attract more business, and the issuer conflict of purchasing only the most...
Persistent link: https://www.econbiz.de/10012757875
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Analyst Promotions within Credit Rating Agencies : Accuracy or Bias?
Kisgen, Darren J. - 2016
We examine whether credit rating agencies reward accurate or biased analysts. Using data collected from Moody's corporate debt credit reports, we find that Moody's is more likely to promote analysts who are accurate, but less likely to promote analysts who downgrade frequently. Combined,...
Persistent link: https://www.econbiz.de/10012985593
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Tiebreaker : Certification and Multiple Credit Ratings
Bongaerts, Dion - 2009
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/10013156427
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Rational Finite Bubbles
Allen, Franklin - 2010
There has been a long-running debate about whether stock market prices are determined by fundamentals. To date no consensus has been reached. An important issue in this debate concerns the circumstances in which deviations from fundamentals are consistent with rational behavior. A...
Persistent link: https://www.econbiz.de/10012763474
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Why Did Some Banks Perform Better During the Credit Crisis? A Cross-Country Study of the Impact of Governance and Regulation
Beltratti, Andrea - 2010
Though overall bank performance from July 2007 to December 2008 was the worst since at least the Great Depression … performance of banks during the credit crisis. More specifically, we investigate whether bank performance is related to bank …-level governance, country-level governance, country-level regulation, and bank balance sheet and profitability characteristics before …
Persistent link: https://www.econbiz.de/10013151816