What if I knew you did it? An analysis of preliminary ratings’ disclosure under competition

Marta Allegra Ronchetti

No 2018/09, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: This paper investigates an amendment to the European Regulation mandating the disclosure of the contact between credit rating agencies (CRAs) and entrepreneurs. If it is costly for the CRAs to become informed, the equilibrium is unique and mandatory disclosure has no effect. When the effort cost is low, disclosure affects negatively the first CRA’s decision to become informed whereas the second CRA is less (more) likely to exert effort when reputation at the outset is low (high). With disclosure, each of the two CRAs can free ride on the other, making not exerting effort more profitable in the transparent regime.

Keywords: rating agencies; preliminary ratings; reputation; disclosure; competition (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:18/09

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