Rating agencies in the face of regulation

• 成果类型: Article
• 署名作者: Opp, Christian C.; Opp, Marcus M.; Harris, Milton
• 署名单位: University of Pennsylvania; University of California System; University of California Berkeley; University of Chicago
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.10.011
• 发表日期: 2013
• 页码: 46-61
• 关键词: Financial Regulation; Rating agencies; certification; Dodd-Frank Act

摘要

This paper develops a theoretical framework to shed light on variation in credit rating standards over time and across asset classes. Ratings issued by credit rating agencies serve a dual role: they provide information to investors and are used to regulate institutional investors. We show that introducing rating-contingent regulation that favors highly rated securities may increase or decrease rating informativeness, but unambiguously increases the volume of highly rated securities. If the regulatory advantage of highly rated securities is sufficiently large, delegated information acquisition is unsustainable, since the rating agency prefers to facilitate regulatory arbitrage by inflating ratings. Our model relates rating informativeness to the quality distribution of issuers, the complexity of assets, and issuers' outside options. We reconcile our results with the existing empirical literature and highlight new, testable implications, such as repercussions of the Dodd-Frank Act. (C) 2012 Elsevier B.V. All rights reserved.