SOLICITED VERSUS UNSOLICITED RATINGS: THE ROLE OF SELECTION

Anna Gibert ()
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Anna Gibert: Statale University of Milan, Bocconi University and DIW Berlin, Via Festa del Perdono 7, 20122 Milan, Italy

Journal of Financial Management, Markets and Institutions (JFMMI), 2019, vol. 07, issue 02, 1-25

Abstract: This paper analyzes the extent to which selection explains the observed discrepancy between solicited and unsolicited ratings. I propose a model of selection with truth telling rating agencies and borrowers with the ability to veto the revelation of the rating. The observed difference between the two categories of ratings in different sectors is in line with the prediction of the model. In the sovereign market there is a positive selection of borrowers into unsolicited ratings whereas other sectors have, on the contrary, lower unsolicited rating grades than those solicited.

Keywords: Unsolicited ratings; sovereign debt; rating agencies; ancillary services (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S2282717X19500051

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