The Ownership of ratings

Eloïc-Anil Peyrache, Antoine Faure-Grimaud and Lucía Quesada
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Eloïc-Anil Peyrache: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique
Antoine Faure-Grimaud: LSE - London School of Economics and Political Science

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Abstract: We identify the optimal contract between a rating agency and a firm and the circumstances under which simple ownership contracts implement this optimal solution. We assume that the decision to obtain a rating is endogenous and the price of a rating is a strategic variable. Clients hiding their ratings can be an equilibrium only if they are ex ante uncertain of their quality and if the hiring decision is not observable. For some distribution functions, a competitive rating market is necessary for this result to obtain. In this context, competition between rating intermediaries will lead to less information in equilibrium.

Keywords: Ownership; ratings (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (47)

Published in The RAND Journal of Economics, 2009, Vol.40,nº2, pp.234-257. ⟨10.1111/j.1756-2171.2009.00063.x⟩

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Related works:
Journal Article: The ownership of ratings (2009)
Working Paper: The ownership of ratings (2007)
Working Paper: The Ownership of Ratings (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00491667

DOI: 10.1111/j.1756-2171.2009.00063.x

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