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Disagreement between rating agencies and bond opacity: A theoretical perspective

  • Hauck, Achim
  • Neyer, Ulrike

In this paper, we explicitly model a bond rating process under varying degrees of bond opacity and derive conditions under which disagreements between rating agencies (rating splits) can serve as a useful proxy for opacity in empirical analyses.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 123 (2014)
Issue (Month): 1 ()
Pages: 82-85

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Handle: RePEc:eee:ecolet:v:123:y:2014:i:1:p:82-85
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. 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.
  2. Gary A. Dymski, 2010. "Why the subprime crisis is different: a Minskyian approach," Cambridge Journal of Economics, Oxford University Press, vol. 34(2), pages 239-255, March.
  3. Beck, T.H.L. & Demirgüc-Kunt, A. & Laeven, L. & Levine, R., 2008. "Finance, firm size and growth," Other publications TiSEM 6e2b24b0-1f95-419b-96c5-a, Tilburg University, School of Economics and Management.
  4. Mark J. Flannery & Simon H. Kwan & M. Nimalendran, 1997. "Market evidence on the opaqueness of banking firms' assets," Proceedings 560, Federal Reserve Bank of Chicago.
  5. Bannier, Christina E. & Behr, Patrick & Güttler, André, 2009. "Rating opaque borrowers: why are unsolicited ratings lower?," Frankfurt School - Working Paper Series 133, .
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  7. Van Roy, Patrick, 2005. "Credit ratings and the standardised approach to credit risk in Basel II," Working Paper Series 0517, European Central Bank.
  8. Miles Livingston & Jie (Diana) Wei & Lei Zhou, 2010. "Moody's and S&P Ratings: Are They Equivalent? Conservative Ratings and Split Rated Bond Yields," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1267-1293, October.
  9. Miles Livingston & Andy Naranjo & Lei Zhou, 2007. "Asset Opaqueness and Split Bond Ratings," Financial Management, Financial Management Association International, vol. 36(3), pages 49-62, 09.
  10. Donald P. Morgan, 2002. "Rating Banks: Risk and Uncertainty in an Opaque Industry," American Economic Review, American Economic Association, vol. 92(4), pages 874-888, September.
  11. Miles Livingston & Lei Zhou, 2010. "Split Bond Ratings and Information Opacity Premiums," Financial Management, Financial Management Association International, vol. 39(2), pages 515-532, 06.
  12. Claudio Borio, 2008. "The financial turmoil of 2007-?: a preliminary assessment and some policy considerations," BIS Working Papers 251, Bank for International Settlements.
  13. Jones, Jeffrey S. & Lee, Wayne Y. & Yeager, Timothy J., 2012. "Opaque banks, price discovery, and financial instability," Journal of Financial Intermediation, Elsevier, vol. 21(3), pages 383-408.
  14. Güntay, Levent & Hackbarth, Dirk, 2010. "Corporate bond credit spreads and forecast dispersion," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2328-2345, October.
  15. Steven W. Pottier & David W. Sommer, 2006. "Opaqueness in the Insurance Industry: Why Are Some Insurers Harder to Evaluate than Others?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 9(2), pages 149-163, 09.
  16. André Güttler, 2005. "Using a Bootstrap Approach to Rate the Raters," Financial Markets and Portfolio Management, Springer, vol. 19(3), pages 277-295, October.
  17. Balasubramnian, Bhanu & Cyree, Ken B., 2011. "Market discipline of banks: Why are yield spreads on bank-issued subordinated notes and debentures not sensitive to bank risks?," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 21-35, January.
  18. Giuliano Iannotta, 2006. "Testing for Opaqueness in the European Banking Industry: Evidence from Bond Credit Ratings," Journal of Financial Services Research, Springer, vol. 30(3), pages 287-309, December.
  19. Steven Drucker & Manju Puri, 2009. "On Loan Sales, Loan Contracting, and Lending Relationships," Review of Financial Studies, Society for Financial Studies, vol. 22(7), pages 2635-2672, July.
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