Repeated Interaction and Rating Inflation: A Model of Double Reputation

• 成果类型: Article
• 署名作者: Frenkel, Sivan
• 署名单位: Hebrew University of Jerusalem; Hebrew University of Jerusalem
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20110077
• 发表日期: 2015
• 页码: 250-280
• 关键词: mortgage-backed securities; Credit ratings; bad reputation; MARKETS; credibility; INFORMATION; audiences; agencies; talk

摘要

Credit rating agencies have an incentive to maintain a public reputation for credibility among investors but also have an incentive to develop a second, private reputation for leniency among issuers. We show that in markets with few issuers, such as markets for structured assets, these incentives may lead rating agencies to inflate ratings as a strategic tool to form a double reputation. The model extends the existing literature on cheap-talk reputation to the case of two audiences. Our results can explain why rating inflation occurred specifically in markets for MBSs and CDOs during the recent financial crisis. Policy implications are discussed.