Advertisement-Financed Credit Ratings

Konferenzbeitrag

Traditional business models of credit rating agencies (CRAs) are criticized for creating incentives for misreporting. This paper investigates a potential alternative in which CRAs receive revenue from advertisement only. We use a two-period Bayesian reputation model and show that CRAs will shirk when their reputation is either very high or very low. When reputation is at a medium level, the prospect of exploiting better reputation in the future might discipline CRAs to exert high effort in the present. However, when misreporting is possible, the CRA will always shirk and conduct either rating inflation or deflation with positive probability.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Financial Economics III ; No. C10-V2

Classification and Topics

• Classification: Wirtschaft ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Asymmetric and Private Information; Mechanism Design ; Information and Product Quality; Standardization and Compatibility

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Siemering, Christian
• Event: Veröffentlichung
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/113195
• Last update: 10.03.2025, 11:46 AM CET