How did increased competition affect credit ratings?

• 成果类型: Article
• 署名作者: Becker, Bo; Milbourn, Todd
• 署名单位: Harvard University; Washington University (WUSTL)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.03.012
• 发表日期: 2011
• 页码: 493-514
• 关键词: credit ratings; Competition and reputation; information quality

摘要

The credit rating industry has historically been dominated by just two agencies, Moody's and Standard & Poor's, leading to long-standing legislative and regulatory calls for increased competition. The material entry of a third rating agency (Fitch) to the competitive landscape offers a unique experiment to empirically examine how increased competition affects the credit ratings market. What we find is relatively troubling. Specifically, we discover that increased competition from Fitch coincides with lower quality ratings from the incumbents: Rating levels went up, the correlation between ratings and market-implied yields fell, and the ability of ratings to predict default deteriorated. We offer several possible explanations for these findings that are linked to existing theories. (C) 2011 Elsevier B.V. All rights reserved.