An edition of Reputation and competition (2008)

Reputation and competition

evidence from the credit rating industry

Reputation and competition
Bo Becker, Bo Becker
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Last edited by MARC Bot
November 29, 2023 | History
An edition of Reputation and competition (2008)

Reputation and competition

evidence from the credit rating industry

Fair and accurate credit ratings arguably play an important role in the financial system. In an environment absent free entry of rating agencies, the provision of quality ratings is at least partially sustained by the reputational concerns of the rating agencies. The economically significant entry of a third agency into a market that was previously best described as a duopoly provides a unique experiment to examine the effect of increased competition on the disciplining effects of reputation. Using a variety of data sources, we find that competition leads to more issuer-friendly and less informative ratings. First, the credit ratings issues by the two incumbent agencies increased toward good ratings. Second, the correlation between bond yields and ratings fell. And lastly, negative stock price responses to announced rating downgrades are larger in absolute value (a downgrade in this weaker ratings environment is even worse news). Ultimately, our findings are consistent with models that suggest competition can impede the reputational mechanism.

Publish Date
Language
English
Pages
35

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Cover of: Reputation and competition

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Book Details


Edition Notes

"October 2008"--Publisher's web site.

Includes bibliographical references.

Published in
Boston
Series
Working paper / Harvard Business School -- 09-051, Working paper (Harvard Business School) -- 09-051

The Physical Object

Pagination
35 p.
Number of pages
35

ID Numbers

Open Library
OL50127004M
OCLC/WorldCat
422212319

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November 29, 2023 Created by MARC Bot Imported from harvard_bibliographic_metadata record