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Credit Rating Industry: a Helicopter Tour of Stylized Facts and Recent Theories

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  • Jeon, Doh-Shin
  • Lovo, Stefano
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    Abstract

    The recent subprime crisis and the ongoing Euro zone crisis have generated an enormous interest in the credit rating industry not only among economists but also among average citizens. As a consequence, we have seen an explosion of the economic literature on the industry. The objective of this survey is to introduce readers to the key stylized facts of the credit rating industry and to the recent theoretical economic literature on this industry.

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    File URL: http://idei.fr//doc/wp/2013/wp_idei_762.pdf
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    Bibliographic Info

    Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 762.

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    Date of creation: 07 Feb 2013
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    Publication status: Published in International Journal of Industrial Organization, vol.�31, n°5, septembre 2013, p.�643-651.
    Handle: RePEc:ide:wpaper:26782

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    1. Bar-Isaac, Heski & Shapiro, Joel, 2013. "Ratings quality over the business cycle," Journal of Financial Economics, Elsevier, vol. 108(1), pages 62-78.
    2. Roland Strausz, . "Honest Certification and the Threat of Capture," Papers 018, Departmental Working Papers.
    3. Bryant, John, 1980. "A model of reserves, bank runs, and deposit insurance," Journal of Banking & Finance, Elsevier, vol. 4(4), pages 335-344, December.
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    5. Hau, Harald & Langfield, Sam & Marqués-Ibáñez, David, 2012. "Bank ratings: what determines their quality?," Working Paper Series 1484, European Central Bank.
    6. Patrick Bolton & Xavier Freixas & Joel Shapiro, 2010. "The credit ratings game," Economics Working Papers 1221, Department of Economics and Business, Universitat Pompeu Fabra.
    7. Becker, Bo & Milbourn, Todd, 2011. "How did increased competition affect credit ratings?," Journal of Financial Economics, Elsevier, vol. 101(3), pages 493-514, September.
    8. Gustavo Manso, 2011. "Feedback Effects of Credit Ratings," 2011 Meeting Papers 1338, Society for Economic Dynamics.
    9. Efraim Benmelech & Jennifer Dlugosz, 2010. "The Credit Rating Crisis," NBER Chapters, in: NBER Macroeconomics Annual 2009, Volume 24, pages 161-207 National Bureau of Economic Research, Inc.
    10. Stahl, Konrad & Strausz, Roland, 2011. "Who should pay for certification?," ZEW Discussion Papers 11-054, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    11. Broecker, Thorsten, 1990. "Credit-Worthiness Tests and Interbank Competition," Econometrica, Econometric Society, vol. 58(2), pages 429-52, March.
    12. Pablo Kurlat & Laura Veldkamp, 2012. "Should We Regulate Financial Information," Working Papers 12-15, New York University, Leonard N. Stern School of Business, Department of Economics.
    13. Jeon, Doh-Shin & Lovo, Stefano, 2011. "Reputation as an Entry Barrier in the Credit Rating Industry," IDEI Working Papers 675, Institut d'Économie Industrielle (IDEI), Toulouse, revised 25 May 2012.
    14. Skreta, Vasiliki & Veldkamp, Laura, 2009. "Ratings shopping and asset complexity: A theory of ratings inflation," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 678-695, July.
    15. Doherty, Neil A. & Kartasheva, Anastasia V. & Phillips, Richard D., 2012. "Information effect of entry into credit ratings market: The case of insurers' ratings," Journal of Financial Economics, Elsevier, vol. 106(2), pages 308-330.
    16. Benabou, R. & Laroque, G., 1988. "Using Privileged Information To Manipulate Markets: Insiders, Gurus And Credibility," Papers 19, Princeton, Woodrow Wilson School - Discussion Paper.
    17. Mariano, Beatriz, 2012. "Market power and reputational concerns in the ratings industry," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1616-1626.
    18. Faure-Grimaud, Antoine & Peyrache, Eloïc & Quesada, Lucía, 2005. "The Ownership of Ratings," CEPR Discussion Papers 5432, C.E.P.R. Discussion Papers.
    19. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
    20. Mathis, Jérôme & McAndrews, James & Rochet, Jean-Charles, 2009. "Rating the raters: Are reputation concerns powerful enough to discipline rating agencies?," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 657-674, July.
    21. Lawrence J. White, 2010. "Markets: The Credit Rating Agencies," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 211-26, Spring.
    22. Jeon, Doh-Shin & Lovo, Stefano, 2011. "Reputation as an Entry Barrier in the Credit Rating Industry," TSE Working Papers 11-235, Toulouse School of Economics (TSE), revised 25 May 2012.
    23. Joshua Coval & Jakub Jurek & Erik Stafford, 2009. "The Economics of Structured Finance," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 3-25, Winter.
    24. Darren J. Kisgen & Philip E. Strahan, 2010. "Do Regulations Based on Credit Ratings Affect a Firm's Cost of Capital?," Review of Financial Studies, Society for Financial Studies, vol. 23(12), pages 4324-4347, December.
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    Cited by:
    1. Chiwitt, Ulrich, 2014. "Ratingagenturen - Fluch oder Segen? Eine kritische Bestandsaufnahme," Arbeitspapiere der FOM 48, FOM Hochschule für Oekonomie & Management.

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