An Equilibrium Model of Credit Rating Agencies

Arbeitspapier

We develop a model of credit rating agencies (CRAs) based on reputation concerns. Ratings affect investors' choice and, thereby, also issuers' access to funding and default risk. We show that - in equilibrium - the informational content of credit ratings is inferior to that of CRAs' private information. We find that CRAs have a pro-cyclical impact on default risk: in a liquidity boom CRAs help resolve investors' coordination problem, and lower the probability of default; in a liquidity crunch CRAs raise the probability of default. Furthermore, rating standards tend to be pro-cyclical, while biased CRA-incentives will ultimately be self-defeating.

Angaben zum Objekt

• ISBN: 978-82-7553-711-7
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2012/23

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Bankruptcy; Liquidation ; Asymmetric and Private Information; Mechanism Design ; Noncooperative Games
• Thema: CRA ; credit rating agencies ; global games ; coordination failure

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Holden, Steinar ; Natvik, Gisle James ; Vigier, Adrien
• Ereignis: Veröffentlichung
• (wer): Norges Bank
• (wo): Oslo
• (wann): 2012

Weitere Informationen

• Handle: http://hdl.handle.net/10419/210022
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ