Do Rating Agencies Benefit from Providing Higher Ratings? Evidence from the Consequences of Municipal Bond Ratings Recalibration
Name
SSRN-id3070712.pdf
Description
Accepted version
Size
464.47 KB
Format
Adobe PDF
Checksum (MD5)
3444e503a6a7c68f70abe2c3dd5c7b3b
Author(s)
BEATTY, ANNE
GILLETTE, JACQUELYN
PETACCHI, REINING
WEBER, JOSEPH
Date Issued
2019
Journal
Journal of Accounting Research
Publisher
Wiley
Version
Author's final manuscript
Abstract
© University of Chicago on behalf of the Accounting Research Center, 2019 We ask whether credit rating agencies receive higher fees and gain greater market share when they provide more favorable ratings. To investigate this question, we use the 2010 rating scale recalibration by Moody's and Fitch, which increased ratings absent any underlying change in issuer credit quality. Consistent with prior research, we find that the recalibration allowed the clients of Moody's and Fitch to receive better ratings and lower yields. We add to this evidence by showing that the recalibration also led to larger fees and to increases in the market shares of Moody's and Fitch. These results are consistent with critics’ concerns about the effects of the issuer-pay model on the credit ratings market.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1111/1475-679X.12263
