Rating Agencies on the International Financial Market: an Approach in Terms of the Transaction Cost Economy
Rating agencies, by the assigned risk grades, point out the quality of debtors and credit instruments in terms of the probability to cease payments and the recovery possibilities. The existence and development of rating agencies on the capital markets is generally explained by the capacity they have to facilitate transparency and efficiency of markets, by reducing the informational asymmetry between the issuers and investors. It is acknowledged by the professional literature that rating agencies diminish the problems of adverse selection and moral hazard. This paper is another theoretical manner of approach, trying to prove that one of the main explanations of the rating agencies existence is the fact that these organizations allow the economy of the transaction costs. The first part of the article briefly describes the concepts of transaction and transaction costs. Also, this part presents a synthetic image of the role of rating agencies on the capital market. The second part makes an analysis of the transaction with rating, as a contractual transaction and, at the same time, a producer of externalities. The paper explains why the transactions with rating can be considered hybrid mechanisms of governance generating externalities upon the exchanges on the financial markets, allowing the creation of new hybrid organizational structures on these markets. Moreover an attempt has been made to list the main categories of transaction costs saved due to the rating agencies requirements.
Volume (Year): 3 (2010)
Issue (Month): 3(11) ()
|Contact details of provider:|| Postal: Str. J.H.Pestalozzi nr. 16, 300115, Timisoara|
Phone: 004 0256 592506
Fax: 004 0256 5925002
Web page: http://www.feaa.uvt.ro
More information through EDIRC
|Order Information:|| Postal: 16 J. H. Pestalozzi Street, 300115, Timisoara, Romania|
Web: http://www.tje.uvt.ro Email:
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.:
- Collin, Sven-Olof, 1997. "Financial intermediation through markets and organizations: An information-boundary argument for financial organizations," Scandinavian Journal of Management, Elsevier, vol. 13(2), pages 175-189, June.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
When requesting a correction, please mention this item's handle: RePEc:wun:journl:tje:v03:y2010:i3(11):a02. 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: (Romeo Margea)
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.