We investigate whether credit rating agencies (CRAs) and investors price the extent to which municipal bond ratings are explainable using public information. We use an ordinal logistic regression to estimate the expected and unexpected portions of bond ratings, and find that both CRA fees and...

A common belief held among researchers and policymakers is that regulatory reliance has inflated market demand for credit ratings, despite their decreasing informational value. Advances in information technology, coupled with reputation losses following the subprime crisis, renew the question of...