Competition and Credit Ratings After the Fall

• 成果类型: Article
• 署名作者: Flynn, Sean; Ghent, Andra
• 署名单位: Arizona State University; Arizona State University-Tempe; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2604
• 发表日期: 2018
• 页码: 1672-1692
• 关键词: financial institutions; MARKETS; finance; INVESTMENT; Corporate finance; Industrial Organization; market structure; Firm strategy; market performance; Credit ratings; rating shopping; rating catering

摘要

We analyze the entry of newcredit rating agencies into structured finance products. Our setting is unique as we study a period in which the incumbents' reputation was extremely poor and the benefit of more fee income from inflating ratings was low. We find entrants issue higher ratings than incumbents, particularly for interest-only tranches. Using measures of market share that are exogenous to incumbent ratings, we provide suggestive evidence that incumbent rating levels become more generous as entrant market share in a product type increases. We also exploit a feature of structured finance that identifies rating shopping and find that incumbent ratings increase in shopping.