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Ratings as Measure of Financial Risk: Evolution, Function and Usage

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  • Alexandr Karminsky

    ()
    (Gazprombank, NES, Moscow, Russia)

  • Anatoly Peresetsky

    ()
    (Central Economics and Mathematics Institute, RAS, NES, Moscow, Russia)

Abstract

The rating agencies were emerged by the demand from market economy. Such agencies take the job of independent evaluation of the firms' financial strength, which allow firms decrease their expenses on their own market monitoring. It is extremely important with increasing number of potential business partners. The paper discusses history of rating business, methods of assigning ratings, rating classification, function and the directions of use.

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Bibliographic Info

Article provided by New Economic Association in its journal Journal of the New Economic Association.

Volume (Year): (2009)
Issue (Month): 1-2 ()
Pages: 86-102

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Handle: RePEc:nea:journl:y:2009:i:1-2:p:86-102

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Related research

Keywords: Ratings; rating agencies; risk evaluation;

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References

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  1. Donald P. Morgan, 2002. "Rating Banks: Risk and Uncertainty in an Opaque Industry," American Economic Review, American Economic Association, vol. 92(4), pages 874-888, September.
  2. Altman, Edward I. & Rijken, Herbert A., 2004. "How rating agencies achieve rating stability," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2679-2714, November.
  3. Richard Cantor & Frank Packer, 1996. "Multiple ratings and credit standards: differences of opinion in the credit rating industry," Staff Reports 12, Federal Reserve Bank of New York.
  4. Altman, Edward I, 1989. " Measuring Corporate Bond Mortality and Performance," Journal of Finance, American Finance Association, vol. 44(4), pages 909-22, September.
  5. Poon, Winnie P. H., 2003. "Are unsolicited credit ratings biased downward?," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 593-614, April.
  6. Moon, Choon-Geol & Stotsky, Janet G, 1993. "Testing the Differences between the Determinants of Moody's and Standard & Poor's Ratings: An Application of Smooth Simulated Maximum Likelihood Estimation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(1), pages 51-69, Jan.-Marc.
  7. Cantor, Richard & Packer, Frank, 1997. "Differences of opinion and selection bias in the credit rating industry," Journal of Banking & Finance, Elsevier, vol. 21(10), pages 1395-1417, October.
  8. Kish, Richard J. & Hogan, Karen M. & Olson, Gerard, 1999. "Does the market perceive a difference in rating agencies?," The Quarterly Review of Economics and Finance, Elsevier, vol. 39(3), pages 363-377.
  9. 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.
  10. Livingston, Miles & Naranjo, Andy & Zhou, Lei, 2008. "Split bond ratings and rating migration," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1613-1624, August.
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Cited by:
  1. Balatsky, E. & Ekimova, N., 2012. "The Global University Rankings: the Problem of Manipulation," Journal of the New Economic Association, New Economic Association, vol. 13(1), pages 126-146.

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