Contracting on Credit Ratings: Adding Value to Public Information

• 成果类型: Article
• 署名作者: Parlour, Christine A.; Rajan, Uday
• 署名单位: University of California System; University of California Berkeley; University of Michigan System; University of Michigan
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz083
• 发表日期: 2020
• 页码: 1412
• 关键词: DEFAULT SWAP SPREADS; COSTS

摘要

We consider the role of credit ratings when contracts between investors and portfolio managers are incomplete. In our model, a credit rating and a price on a risky bond both provide verifiable signals about a non-contractible state. We allow the investor to both impose ex ante restrictions on the manager's action and provide outcome-based compensation. The optimal contract is a prohibitive one when the rating and price indicate a high likelihood of a low state, and relies on wages when the low state is less likely. We provide some observable implications of our contracting approach to ratings.