Arbeitspapier
An empirical analysis of changes in the relative timeliness of issuer-paid vs. investor-paid
We investigate the lead-lag relationships between issuer- and investor-paid credit rating agencies, in the aftermath of the regulatory reforms undertaken in the U.S. between 2002 and 2006 - including watch list inclusions and outlooks. First, we find that the lead effect of investor-paid over issuer-paid credit rating agencies has weakened: in recent years, causality has turned bi-directional. Second, when changes in outlooks are included, we find evidence of a less conservative behavior by issuer-paid agencies, when compared to their rating behavior. Third, stock prices manifest statistically significant abnormal reactions to downgrades of all agencies; however, abnormal negative returns are significantly higher for investor-paid downgrades. Our results support the hypothesis that when issuer-paid agencies have seen their market power threatened by tighter regulations, they have felt incentives to improve the quality and timeliness of their ratings. However, event studies show that markets still price stocks under the assumption that investor-paid rating actions carry superior information.
- Language
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Englisch
- Bibliographic citation
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Series: Manchester Business School Working Paper ; No. 639
- Classification
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Wirtschaft
Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
Financial Institutions and Services: Government Policy and Regulation
- Subject
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rating agencies
timeliness
issuer-paid agencies
investor-paid business model
NRSRO
- Event
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Geistige Schöpfung
- (who)
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Berwart, Erik
Guidolin, Massimo
Milidonis, Andreas
- Event
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Veröffentlichung
- (who)
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The University of Manchester, Manchester Business School
- (where)
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Manchester
- (when)
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2013
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Berwart, Erik
- Guidolin, Massimo
- Milidonis, Andreas
- The University of Manchester, Manchester Business School
Time of origin
- 2013
Other Objects (12)
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Paid in Full
Appendix III. Partially paid Forces of Self-governing Colonies. : Partially paid Forces of Self-governing Colonies.
Paymentsysteme für Paid Content
Intra-family distribution of paid-work time
Getting paid without GetPaid
Pricing von paid content und paid services
Paid Work
Paid my dues
I paid Hitler
Paid to Quit
Paid to quit
I paid Hitler
Paid in Full
Appendix III. Partially paid Forces of Self-governing Colonies. : Partially paid Forces of Self-governing Colonies.
Paymentsysteme für Paid Content
Intra-family distribution of paid-work time
Getting paid without GetPaid
Pricing von paid content und paid services
Paid Work
Paid my dues
I paid Hitler
Paid to Quit
Paid to quit
I paid Hitler
Paid in Full
Appendix III. Partially paid Forces of Self-governing Colonies. : Partially paid Forces of Self-governing Colonies.
Paymentsysteme für Paid Content