Does Reputation still Matter to Credit Rating Agencies?

Serkan Çankaya

A chapter in Global Financial Crisis and Its Ramifications on Capital Markets, 2017, pp 445-458 from Springer

Abstract: Abstract The purpose of this study is to analyze and critically review the role of credit rating agencies in financial markets. The remarkable disappointment of top-rated structured finance products in the subprime crisis has placed renewed attention on credit rating agencies. As a result of this development, the ongoing debate about whether market forces provide sufficient control of rating agencies or whether regulation is necessary has been rekindled. The discussion focuses on the argument that the reputation of a credit rating agency is sufficient to discipline them. This essay contributes to this debate by providing a behavioral perspective. The introduction provides a brief historical overview and examines the role of credit rating agencies in financial markets. The second section addresses the role of rating agencies in the subprime crisis by highlighting the conflict of interest problem, ratings quality and regulation. The next section analyzes the effects of US- and EU-based regulations. The main contribution of this paper is made in the last section, which points out the behavioral perspective on credit ratings.

Keywords: Rating Agency; Credit Rating; Credit Rating Agency; Mortgage Backed Security; Interest Problem (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-319-47021-4_31

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DOI: 10.1007/978-3-319-47021-4_31

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