The valuation effects of bank loan ratings in the presence of multiple monitors

Thomas Meyer (), Wei-Huei Hsu and Fayez Elayan

Journal of Economics and Finance, 2006, vol. 30, issue 3, 325-346

Abstract: Studies have shown that when two information providers or outside auditors exist, the value provided by the second one will be decreased by the actions of the first. Credit rating agencies have been rating bank loans since 1996. Capitalizing on the highly similar functions performed by banks and these agencies, the informational value of bank loan ratings is examined. Further, evidence is provided on whether rating agencies duplicate the certifying and monitoring roles played by banks. The significant market reaction to negative bank loan rating announcements suggests these rating actions convey information beyond that provided via bank loan approvals and renewals. Copyright Academy of Economics and Finance 2006

Date: 2006
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DOI: 10.1007/BF02752739

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