Market Discipline Through Credit Ratings and Too-Big-To-Fail in Banking?

Sascha Kolaric, Florian Kiesel and Steven Ongena
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Sascha Kolaric: Technische Universität Darmstadt
Florian Kiesel: Technische Universität Darmstadt

No 17-09, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We assess whether credit ratings help enforce market discipline on banks. We nd that rating downgrades for internal reasons, such as adverse changes in the operating performance or capital structure of the banks, are associated with a significant CDS spread widening, but only for banks that are not perceived to be Too-Big-to-Fail. Our findings question the reliability of credit ratings as a tool to discipline large banks and suggests regulatory monitoring should remain the main mechanism for disciplining these banks.

Keywords: Credit Ratings; CDS; Too-Big-To-Fail (search for similar items in EconPapers)
JEL-codes: G13 G14 G21 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2017-03
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Market Discipline through Credit Ratings and Too‐Big‐to‐Fail in Banking (2021)
Working Paper: Market Discipline through Credit Ratings and Too‐Big‐to‐Fail in Banking (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1709

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