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Disagreement between rating agencies and bond opacity: A theoretical perspective

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  • Hauck, Achim
  • Neyer, Ulrike

Abstract

In this paper, we explicitly model a bond rating process under varying degrees of bond opacity and derive conditions under which disagreements between rating agencies (rating splits) can serve as a useful proxy for opacity in empirical analyses.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 123 (2014)
Issue (Month): 1 ()
Pages: 82-85

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Handle: RePEc:eee:ecolet:v:123:y:2014:i:1:p:82-85

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Opaque assets; Ratings; Rating agencies; Rating splits;

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References

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  1. Beck, T.H.L. & Demirgüc-Kunt, A. & Laeven, L. & Levine, R., 2008. "Finance, firm size and growth," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3132808, Tilburg University.
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  11. Jones, Jeffrey S. & Lee, Wayne Y. & Yeager, Timothy J., 2012. "Opaque banks, price discovery, and financial instability," Journal of Financial Intermediation, Elsevier, vol. 21(3), pages 383-408.
  12. Claudio Borio, 2008. "The financial turmoil of 2007-?: a preliminary assessment and some policy considerations," BIS Working Papers 251, Bank for International Settlements.
  13. Martin Hellwig, 2008. "Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial Crisis," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_43, Max Planck Institute for Research on Collective Goods.
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  16. Miles Livingston & Andy Naranjo & Lei Zhou, 2007. "Asset Opaqueness and Split Bond Ratings," Financial Management, Financial Management Association International, vol. 36(3), pages 49-62, 09.
  17. Steven Drucker & Manju Puri, 2009. "On Loan Sales, Loan Contracting, and Lending Relationships," Review of Financial Studies, Society for Financial Studies, vol. 22(7), pages 2635-2672, July.
  18. Giuliano Iannotta, 2006. "Testing for Opaqueness in the European Banking Industry: Evidence from Bond Credit Ratings," Journal of Financial Services Research, Springer, vol. 30(3), pages 287-309, December.
  19. Miles Livingston & Jie (Diana) Wei & Lei Zhou, 2010. "Moody's and S&P Ratings: Are They Equivalent? Conservative Ratings and Split Rated Bond Yields," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1267-1293, October.
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