Rating agencies state that they take a rating action only when it is unlikely to bereversed shortly afterwards. Based on a formal representation of the rating process, Ishow that such a policy provides a good explanation for the empirical evidence: Ratingchanges occur relatively seldom, exhibit...

Rating agencies state that they take a rating action only when it is unlikely to bereversed shortly afterwards. Using a formal representation of the rating process, I showthat such a policy provides a good explanation for the empirical evidence: ratingchanges relatively seldom occur, they...

Credit rating agencies are important institutions of the global capital markets. If they had performed properly, the financial crisis of 2008-2009 would not have occurred, and the course of world history would have been different. There is a near universal consensus that reform is needed, but...

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 has been compromised by the evolution of the industry to a form where issuers pay for ratings. In this...

We explore through both an economics and regulatory lens the frictions associated with credit rating agencies in the aftermath of the financial crisis. While ratings and other public signals are an efficient response to scale economies in information production, these also can discourage...

This paper explores the possibility of remedial intervention against the credit rating oligopoly under the competition rules. It is divided in six parts. Following an introduction, Part II provides an overview of the credit rating industry. Part III demonstrates that there is a possible economic...

This paper, a chapter in the forthcoming Research Handbook on the Economics of Corporate law, describes the leading research related to credit ratings, and assesses regulatory proposals related to ratings, including those in the Dodd-Frank Act of 2010. It explains how rating agencies have...

We compare the structure and performance of private (non-GSE) mortgage-backed securities sold by large issuers vs. those sold by small issuers over the period 2000-2006. Securities sold by large issuers have less subordination — a greater fraction of the deal receiving AAA rating — than...

This paper identifies rating verifiability as a key difference that explains why credit rating agencies (CRAs) failed to mitigate information asymmetries in the structured finance market but succeeded in the bond market. Two infinitely repeated models are analyzed. In the first, the rating is...

For decades, the credit rating market has been dominated by three major agencies (Moody's, S&P and Fitch Ratings). Their oligopolistic dominance is especially strong in sovereign credit ratings industry, where they hold a collective global share of more than 99%. Global financial crisis and the...