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The Economics of Rating Watchlists: Evidence from Rating Changes Author info | Abstract | Publisher info | Download info | Related research | Statistics Christina E. Bannier ()
Christian Hirsch ()
Generally, information provision and certification have been identified as the major economic functions of rating agencies. This paper analyzes whether the “watchlist” (rating review) Instrument has extended the agencies’ role towards a monitoring position, as proposed by Boot, Milbourn, and Schmeits (2006). Using a data set of Moody’s ratings between 1982 and 2004, we find that the overall information content of rating action has indeed increased due to the introduction of the watchlist procedure. Our findings suggest that rating reviews help to establish implicit monitoring contracts between agencies and borrowers and as such enable a finer partition of rating information, thereby contributing to a higher information quality.
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Paper provided by Department of Finance, Goethe University Frankfurt am Main in its series Working Paper Series: Finance and Accounting with number
184.
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Date of creation: Feb 2008Date of revision:
Handle: RePEc:fra:franaf:184Contact details of provider: Postal: Senckenberganlage 31, 60054 Frankfurt Phone: 0049-69-798-28269 Fax: 0049-69-798-28272 Web page: http://www.finance.uni-frankfurt.de More information through EDIRC
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Keywords: Find related papers by JEL classification: G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies G29 - Financial Economics - - Financial Institutions and Services - - - Other G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
This paper has been announced in the following NEP Reports :
References listed on IDEAS 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.: Hand, John R M & Holthausen, Robert W & Leftwich, Richard W, 1992.
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"Credit Ratings as Coordination Mechanisms ,"
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Other versions:
Arnoud W. A. Boot & Todd T. Milbourn, 2002.
"Credit Ratings as Coordination Mechanisms ,"
William Davidson Institute Working Papers Series
457, William Davidson Institute at the University of Michigan Stephen M. Ross Business School.
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CEPR Discussion Papers
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Tinbergen Institute Discussion Papers
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"An introduction to recent research on credit ratings ,"
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