We identify the optimal contract between a rating agency and a firm and the circumstances under which simple ownership contracts implement this optimal solution. We assume that the decision to obtain a rating is endogenous and the price of a rating is a strategic variable. Clients hiding their...

Regulatory independence from political control enlarges the collusive opportunities between regulators and interest groups. This is costly for current politicians because deterring capture becomes harder. However, independence also constrains future governments. Whenever future and current...