Can investor-paid credit rating agencies improve the information quality of issuer-paid rating agencies?

• 成果类型: Article
• 署名作者: Xia, Han
• 署名单位: University of Texas System; University of Texas Dallas
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.10.015
• 发表日期: 2014
• 页码: 450-468
• 关键词: credit ratings; information quality; Investor-paid rating agencies

摘要

This paper examines how the information quality of ratings from an issuer-paid rating agency (Standard and Poor's) responds to the entry of an investor-paid rating agency, the Egan-Jones Rating Company (EJR). By comparing S&P's ratings quality before and after EJR initiates coverage of each firm, I find a significant improvement in S&P's ratings quality following EJR's coverage initiation. S&P's ratings become more responsive to credit risk and its rating changes incorporate higher information content. These results differ from the existing literature documenting a deterioration in the incumbents' ratings quality following the entry of a third issuer-paid agency. I further show that the issuer-paid agency seems to improve the ratings quality because EJR's coverage has elevated its reputational concerns. (C) 2013 Elsevier B.V. All rights reserved.