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The Credit Rating Crisis
Benmelech, Efraim - 2009
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
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Is Stock Index Membership for Sale?
Li, Kun; Liu, Xin; Wei, Shang-jin - National Bureau of Economic Research - 2021
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
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Bank sovereign bond holdings, sovereign shock spillovers, and moral hazard during the European crisis
Beltratti, Andrea - 2015
From 2010 to 2012, the relation between bank stock returns from European Union (EU) countries and the returns on …
Persistent link: https://www.econbiz.de/10012457516
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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/10012460074
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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/10012463319
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The Credit Ratings Game
Bolton, Patrick - 2009
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/10012463935
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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/10012458692
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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/10012459738
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Information Acquisition and Rating Agencies
Cole, Harold L.; Cooley, Thomas F. - National Bureau of Economic Research - 2023
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/10014322691
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Corporate Control, Portfolio Choice, and the Decline of Banking
Gorton, Gary - 1992
eroded the profitability of banks' traditional activities. Bank failures, insignificant from 1934, the date the Glass … centers on fixed-rate deposit insurance: the insurance gives bank shareholders an incentive to take on risk when the value of … bank charters falls. We propose and test an alternative explanation based on corporate control considerations. We show that …
Persistent link: https://www.econbiz.de/10012474716