The quality of credit ratings: A two-sided market perspective

Jorge Ponce

Economic Systems, 2012, vol. 36, issue 2, 294-306

Abstract: This paper presents a formal model of a credit rating agency. I study the consequences of the transition from an “investor-pays” model to an “issuer-pays” model on the quality standard of credit ratings chosen by the agency. I find that such a transition is likely to generate a degradation of the quality standard, which may fall below the socially efficient level. Finally, I discuss empirical implications and several reform proposals to the business model of credit rating agencies.

Keywords: Credit rating agencies; Issuer-pays; Investor-pays; Two-sided market; Endogenous quality (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0939362511000963
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Quality of Credit Ratings. A Two-Sided Market Perspective (2010)
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:eee:ecosys:v:36:y:2012:i:2:p:294-306

DOI: 10.1016/j.ecosys.2011.06.004

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Liu ().