Did Government Regulations Lead to Inflated Credit Ratings?

• 成果类型: Article
• 署名作者: Behr, Patrick; Kisgen, Darren J.; Taillard, Jerome P.
• 署名单位: Boston College; Babson College
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2615
• 发表日期: 2018
• 页码: 1034-1054
• 关键词: credit ratings; SEC; default risk; NRSROs; capital markets regulation; regulatory licensing

摘要

Securities and Exchange Commission (SEC) regulations in 1975 gave select rating agencies increased market power by increasing both barriers to entry and the reliance on ratings for regulations. We test whether these regulations led to ratings inflation. We find that defaults and negative financial changes are more likely for firms given the same rating if the rating was assigned after the SEC action. Furthermore, firms initially rated Baa in the post-regulation period are 19% more likely to be negatively downgraded to speculative grade than firms rated Baa in the pre-regulation period. These results indicate that the market power derived from the SEC led to ratings inflation.