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Market Structure Development in a Regulated Market: The Case of the EU Rating Agencies

Author

Listed:
  • Meeh-Bunse Gunther

    (University of Applied Science Osnabrueck, Germany)

  • Schomaker Stefan

    (University of Applied Science Osnabrueck, Germany)

Abstract

Background: The motivation for this article is the observation of political and private efforts to establish an EU-based rating agency as a counterweight to the three major agencies and observe other approaches to increase competition in the rating market. Objectives: This article aims to analyse the potential regulatory impact of the oligopo-listic situation on the European Union (EU) rating market in the regulation imposed on the agencies. Methods/Approach: Selected key figures are applied to observe if and how the dominance has changed. The different rating service range offered by the registered rating agencies in the EU is also considered in the analysis. Results: The re-search results show that new agencies potentially impact the EU rating market. While the three major rating agencies still dominate the market, they do so within a chang-ing environment. Conclusions: The employment of external ratings is significant in the financial sector. Ratings provide relevant information on the default risk of financial instruments and assess the solvency of issuers. The market for external ratings thereby can be classified as oligopolistic. Turbulences during the financial crisis of 2008 trig-gered stricter regulation of the credit rating agencies. Such regulation has now been in force for a good decade.

Suggested Citation

  • Meeh-Bunse Gunther & Schomaker Stefan, 2021. "Market Structure Development in a Regulated Market: The Case of the EU Rating Agencies," Business Systems Research, Sciendo, vol. 12(2), pages 187-199, December.
    • Handle: RePEc:bit:bsrysr:v:12:y:2021:i:2:p:187-199:n:12
    DOI: 10.2478/bsrj-2021-0027
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    References listed on IDEAS

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    1. Meeh-Bunse, Gunther & Schomaker, Stefan, 2020. "An Analysis of the Competitive Situation on the EU Rating Market in Context of Regulatory Requirements," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2020), Virtual Conference, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Virtual Conference, 10-12 September 2020, pages 147-156, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
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    Keywords

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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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