Bonuses, Credit Rating Agencies and the Credit Crunch

Peter Sinclair, Guy Spier () and Tom Skinner

CDMA Conference Paper Series from Centre for Dynamic Macroeconomic Analysis

Abstract: The payment of bonuses can bring big benefits. But harm, too, can result. In the financial sector, this is especially true, above all when they are related to noisy indicators of performance over brief periods. This paper starts by exploring these ideas, then proceeds to examine credit rating agencies and their role in the 2007 credit crunch. It emphasizes the paucity of long term high frequency financial data to quantify tail event risks, the failure to apply analysis of fundamentals in financial and housing markets, and rewards structures to individual players that reinforced myopia as three key components of the crisis.

Keywords: bonuses; credit crunch; credit rating agencies. (search for similar items in EconPapers)
JEL-codes: D53 D86 G32 (search for similar items in EconPapers)
Date: 2008-09
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Bonuses, Credit Rating Agencies and the Credit Crunch (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:san:cdmacp:0805

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