Rating Agency Fees: Pay to Play in Public Finance?

• 成果类型: Article
• 署名作者: Cornaggia, Jess; Cornaggia, Kimberly J.; Israelsen, Ryan
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; Michigan State University; Michigan State University's Broad College of Business
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhac073
• 发表日期: 2023
• 页码: 2004
• 关键词: credit ratings; municipal bonds; MARKET; QUALITY; COSTS; intermediation; geography; RISK

摘要

We examine the relationship between credit rating levels and rating agency fees in a public finance market in which rating agencies earn lower fees and face higher disclosure requirements relative to corporate bond and structured finance markets. Controlling for variation in the complexity of credit analysis at the issue level, we find evidence that rating agency conflicts of interest distort credit ratings in the municipal bond market. Unexpectedly expensive ratings are more likely downgraded, and inexpensive ratings are more likely upgraded. The relationship between credit ratings and rating agency fees is driven by issuers who lose access to AAA insurance.