Reputation and competition: evidence from the credit rating industry

Bo Becker and Todd Milbourn ()
Additional contact information
Todd Milbourn: Washington University, St. Louis.John M. Olin School of Business

No 09-051, Harvard Business School Working Papers from Harvard Business School

Abstract: 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.

JEL-codes: C7 D83 G14 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2008-10, Revised 2010-09
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
http://www.hbs.edu/research/pdf/09-051.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hbs:wpaper:09-051

Access Statistics for this paper

More papers in Harvard Business School Working Papers from Harvard Business School Contact information at EDIRC.
Bibliographic data for series maintained by HBS ().