Rating risks: risk and uncertainty in an opaque industry
AbstractThe pattern of disagreement between bond raters suggests that bank and insurance firms are inherently more opaque than other firms. Moody's and Standard and Poor's split more frequently over these financial intermediaries, and the splits are more lopsided, as theory here predicts. Uncertainty over the banks stems from their assets, loans and trading assets in particular, the risks of which are hard to observe or easy to change. Banks' high leverage, which invites agency problems, compounds the uncertainty over their assets. Our findings bear on both the existence and reform of bank regulation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Staff Reports with number 105.
Date of creation: 2000
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stewart C. Myers & Raghuram G. Rajan, 1995.
"The Paradox of Liquidity,"
NBER Working Papers
5143, National Bureau of Economic Research, Inc.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
- Mark J. Flannery, 1991.
"Debt maturity and the deadweight cost of leverage: optimally financing banking firms,"
Federal Reserve Bank of San Francisco, issue Nov.
- Flannery, Mark J, 1994. "Debt Maturity and the Deadweight Cost of Leverage: Optimally Financing Banking Firms," American Economic Review, American Economic Association, vol. 84(1), pages 320-31, March.
- Bonaccorsi di Patti, Emilia & Dell'Ariccia, Giovanni, 2004.
"Bank Competition and Firm Creation,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 36(2), pages 225-51, April.
- Emilia Bonaccorsi Di Patti & Giovanni Dell'Ariccia, 2003. "Bank competition and firm creation," Temi di discussione (Economic working papers) 481, Bank of Italy, Economic Research and International Relations Area.
- Giovanni Dell'Ariccia, 2001. "Bank Competition and Firm Creation," IMF Working Papers 01/21, International Monetary Fund.
- Emilia Bonaccorsi di Patti & Giovanni Dell'Ariccia, 2000. "Bank competition and firm creation," Proceedings 680, Federal Reserve Bank of Chicago.
- Peter C. Reiss, 1989. "Economic and Financial Determinants of Oil and Gas Exploration Activity," NBER Working Papers 3077, National Bureau of Economic Research, Inc.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Mark S. Carey & Stephen D. Prowse & John D. Rea, 1993. "Recent developments in the market for privately placed debt," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 77-92.
- Krasa, Stefan & Villamil, Anne P, 1992. "A Theory of Optimal Bank Size," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 725-49, October.
- Donald P. Morgan & Kevin J. Stiroh, 1999. "Bond market discipline of banks: is the market tough enough?," Staff Reports 95, Federal Reserve Bank of New York.
- Demsetz, Rebecca S & Strahan, Philip E, 1997. "Diversification, Size, and Risk at Bank Holding Companies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 300-313, August.
- Timothy H. Hannan & Gerald A. Hanweck, 1986.
"Bank insolvency risk and the market for large certificates of deposit,"
Working Papers in Banking, Finance and Microeconomics
86-1, Board of Governors of the Federal Reserve System (U.S.).
- Hannan, Timothy H & Hanweck, Gerald A, 1988. "Bank Insolvency Risk and the Market for Large Certificates of Deposit," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 203-11, May.
- Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber).
If references are entirely missing, you can add them using this form.