There are few things more constant in life than the rise and fall of financial markets. When markets crash, however, we are forced to restore them while learning from our mistakes. In the wake of the recent subprime mortgage crisis, Congress has drastically but deservedly overhauled the...

The aim of the elaboration is to draw attention to selected aspects of credit rating. For that reason, comparison and induction methods were used. The article deals with credit rating and its present importance for the financial market. On that basis, possible scenarios for credit rating...

We find that Credit Rating Agencies (CRAs) see through transitory shocks to credit risk that stem from transitory shocks to equity prices, while market-based measures of credit risk do not. For a given stock return, CRAs are significantly less likely to downgrade firms with transitory shocks...

This paper provides evidence of ratings shopping in the corporate bond market. By estimating systematic differences in agencies' biases about any given firm's bonds, I show that new bonds are more likely to be rated by agencies that are positively biased towards the firm---a pattern that is...

This paper assesses how the presence of rating actions and discordant evaluations by a different rival credit rating agency (CRA) affects the timing of downgrades and the likelihood of rating convergence in the aftermath of the subprime crisis. We analyse a large sample of subprime...

This paper compares conflict of interest incentives and reputational concerns of credit rating agencies (CRAs) in the context of the subprime crisis. We argue that, during up-market periods, ratings levels are affected by both a strong tendency for alignment across CRAs and ratings...

Using a dataset of Home Equity Loan securities issued up to June 2007 and rated by Moody’s and/or S&P, this paper investigates how discretionary ratings are priced by the market. To this end, a measure of relative rating inflation (Rating Bias) observable at issuance is proposed. The way...

This paper uses a unique data set from credit files of six leading German banks to provide some empirical insights into their rating systems used to classify corporate borrowers. On the basis of the New Basle Capital Accord, which allows banks to use their internal rating systems to compute...

An important theoretical literature motivates collateral as a mechanism that mitigates adverse selection, credit rationing, and other inefficiencies that arise when borrowers hold ex ante private information. There is no clear empirical evidence regarding the central implication of this...

This paper uses a unique data set from credit files of six leading German banks to provide some empirical insights into their rating systems used to classify corporate borrowers. On the basis of the New Basle Capital Accord, which allows banks to use their internal rating systems to compute...