Do rating agencies cater? Evidence from rating-based contracts

• 成果类型: Article
• 署名作者: Kraft, Pepa
• 署名单位: New York University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2014.09.008
• 发表日期: 2015
• 关键词: credit ratings; debt; INFORMATION; INVESTMENT; QUALITY

摘要

I examine whether rating agencies cater to borrowers with rating-based performance-priced loan contracts (PPrating firms). I use data from Moody's Financial Metrics on its quantitative adjustments for off-balance-sheet debt and qualitative adjustments for soft factors. In the cross-section and for borrowers experiencing adverse economic shocks, I find that these adjustments are more favorable for PPrating firms than for other firms, consistent with rating agencies catering to the PPrating borrowers. I find that this catering is muted in two circumstances when rating agencies' reputational costs are higher than usual: (1) near the investment grade and prime short-term rating thresholds and (2) when Fitch Ratings also provides a rating. (C) 2014 Elsevier B.V. All rights reserved.