Moral Hazard with Rating Agency: An Incentive Contracting Approach
Credit Rating agencies su?er from a possible moral hazard problem. This is caused due to the fact that the evaluation standards set by rating agencies are unobservable to outsiders. In this paper, we address the moral hazard problem with the rating agencies. We discuss the feasibility of possible incentive contracts that can ameliorate this problem. We ¡¥nd, that incentive payments to the rating agency based on expected returns on debt will eliminate the moral hazard problem.
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.:
- Nayar, Nandkumar, 1993. "Asymmetric information, voluntary ratings and the Rating Agency of Malaysia," Pacific-Basin Finance Journal, Elsevier, vol. 1(4), pages 369-380, December.
- Christoph Kuhner, 2001. "Financial Rating Agencies: Are They Credible? – Insights Into The Reporting Incentives Of Rating Agencies In Times Of Enhanced Systemic Risk," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 53(1), pages 2-26, January.
- Anette Boom, "undated". "A Monopolistic Credit Rating Agency," Papers 011, Departmental Working Papers.
When requesting a correction, please mention this item's handle: RePEc:cuf:journl:y:2004:v:5:i:2:p:313-333. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qiang Gao)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.