Testing conflicts of interest at bond rating agencies with market anticipation
Subtitle: evidence that reputation incentives dominate
By: Daniel M. Covitz and Paul Harrison.
Contributors: Harrison, Paul.
Series: Finance and economics discussion series ;; 2003-68; Finance and economics discussion series (Online) ;; 2003-68.
Publisher: Federal Reserve Board
Published: 2003
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "This paper presents the first comprehensive test of whether well-known conflicts of interest at bond rating agencies importantly influence their actions.  This hypothesis is tested against the alternative that rating agency actions are primarily influenced by a countervailing incentive to protect their reputations as delegated monitors.  These two hypotheses generate a number of testable predictions regarding the anticipation of credit-rating downgrades by the bond market, which we investigate using a new data set of about 2,000 credit rating migrations from Moody's and Standard & Poor's, and matching issuer-level bond prices.  The findings strongly indicate that rating changes do not appear to be importantly influenced by rating agency conflicts of interest but, rather, suggest that rating agencies are motivated primarily by reputation-related incentives"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 7/9/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.