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This paper examines the informational efficiency of loans relative to bonds surrounding loan default dates and bond default dates. We examine this issue using a unique dataset of daily secondary market prices of loans over the11/1999-06/2002 period.(...)
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The paper asks if credit rating agencies have incentives to misrepresent their clients’credit quality during an ongoing …’s reputational pay-offs. We show that there are no separating equilibria in whichagencies report observed credit quality truthfully …
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