We consider the role of credit ratings when contracts between investors and portfolio managers are incomplete. In our model, a credit rating and a price on a risky bond both provide verifiable signals about a non-contractible state. We allow the investor to both impose ex ante restrictions on...

We study a model in which an issuer can manipulate information obtained by a credit rating agency (CRA). Better CRA screening reduces the likelihood of a high rating, but increases the value of a rated security. We find that improving the prior quality of assets can have no effect on the quality...

Do credit ratings affect the information content of corporate disclosure? Using novel data on rating analysts to obtain exogenous variation in rating information, we find that greater uncertainty in credit ratings increases the quality of information disclosed by the firm. This is consistent...

This study investigates whether and when differences in the credit rating agencies' methodologies result in differences in rating properties. In particular, this study focuses on differences in information processing constraints between a rating agency that utilizes qualitative analysis and...

Information about credit quality is uncertain and varies across debt maturity. We show that an ambiguity-averse firm manager will avoid maturities with ambiguous credit information. We thus hypothesize that firms choose maturity structures where perceived credit quality uncertainty is lower....

Small and medium-sized enterprises (SMEs) are the backbone of most Asian economies. The main obstacle to the development of the SME sector is the lack of stable finance. Considering the bank-dominated characteristic of economies in Asia, banks are the main source of financing, and the lack of a...

In this paper we challenge the view that corporate bonds are always arm's length debt. We analyze the effect of bond ratings on the stock price return to acquirers in M&A transactions, which tend to have significant effects on creditor wealth. We find acquirers abnormal returns to be higher if...

In this paper, we provide empirical evidence about the credit factors that impact the pricing of newly issued residential mortgage-backed securities (RMBS) in the U.K. There is an important implication of our findings for the current debate by regulators throughout the world regarding whether...

Using a data set that records banks' ongoing requests of information from small commercial borrowers, we examine when banks use financial statements to monitor borrowers after loan origination. We find that banks request financial statements for half the loans and this variation is related to...

Using a dataset which records banks' ongoing requests of information from small commercial borrowers, we examine when banks use financial statements to monitor borrowers after loan origination. We find banks request financial statements for half the loans and this variation is related to...