Information Sharing and Rating Manipulation

Mariassunta Giannetti, José María Liberti and Jason Sturgess

The Review of Financial Studies, 2017, vol. 30, issue 9, 3269-3304

Abstract: We show that banks manipulate borrowers’ credit ratings before sharing them with competing banks. Using a unique feature on the timing of information disclosure of a public credit registry, we disentangle the effect of manipulation from learning of credit ratings. We show that banks downgrade high-quality borrowers for which they have positive private information to protect their informational rents. Banks also upgrade low-quality borrowers with multiple lenders to avoid creditor runs. Our results suggest that credit ratings manipulation limits the positive effects of credit registries’ information disclosure on credit allocation.Received April 18, 2016; editorial decision April 1, 2017 by Editor Philip Strahan.

JEL-codes: G02 G14 G38 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (17)

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Working Paper: Information Sharing and Rating Manipulation (2016)
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