The Quality of Credit Ratings. A Two-Sided Market Perspective

Jorge Ponce

No 2009002, Documentos de trabajo from Banco Central del Uruguay

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. 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)
JEL-codes: D42 G24 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2009, Revised 2010-02-24
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https://www.bcu.gub.uy/Estadisticas-e-Indicadores/ ... 20Trabajo/2.2009.pdf Preliminary version, 2010 (application/pdf)

Related works:
Journal Article: The quality of credit ratings: A two-sided market perspective (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bku:doctra:2009002

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