How did increased competition affect credit ratings?
By: Bo Becker, Todd Milbourn
Contributors: Milbourn, Todd; Harvard Business School
Edition: 2nd rev.
Series: Working paper / Harvard Business School -- 09-051; Working paper (Harvard Business School) -- 09-051.
Publisher: Harvard Business School
Published: 2008
Place of publication: [Boston]
Language: eng
Number of pages: 47
Description: The credit rating industry has historically been dominated by just two agencies, Moody's and S&P, leading to longstanding 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 in fact increased competition affects the credit ratings market. 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.
Notes: "October 2008, revised July 2009, September 2010"--Publisher's website.

Originally published as: Reputation and competition--evidence from the credit rating industry.

Includes bibliographical references.