IDEAS home Printed from https://ideas.repec.org/a/wun/journl/tjev03y2010i3(11)a02.html
   My bibliography  Save this article

Rating Agencies on the International Financial Market: an Approach in Terms of the Transaction Cost Economy

Author

Listed:
  • Monica DUDIAN

    (Academy of Economic Studies Bucharest, România)

Abstract

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.

Suggested Citation

  • Monica DUDIAN, 2010. "Rating Agencies on the International Financial Market: an Approach in Terms of the Transaction Cost Economy," Timisoara Journal of Economics, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 3(3(11)), pages 139-146.
  • Handle: RePEc:wun:journl:tje:v03:y2010:i3(11):a02
    as

    Download full text from publisher

    File URL: http://www.tje.uvt.ro/index.php/tje/article/download/75/pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    2. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    rating; rating agencies; transaction costs; financial market;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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). General contact details of provider: http://edirc.repec.org/data/feuvtro.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.