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Credit Rating and Corporate Finance

In: Strategic Thinking for Turbulent Times

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  • M. S. S. Namaki

Abstract

Failure of many a structural finance instrument can be largely attributed to the underlying process of credit rating. The process whereby amorphous and at times dubious finance instruments were offered to unsuspecting buyers went out of line when clients, driven by ignorance and greed, took the credit rating of those instruments at face value. This face value did not, in many cases, reflect the potential of the instrument or the margin of risk involved. It was also bestowed by credit rating agencies who maintained an embryonic relationship with the very finance industry that “made” the instruments. The exceptionally high ratings and the air of competency that surrounded the agencies created an aura of invincibility. And the very fact that industry and government seemed to bless the outcome added to the unfolding drama!

Suggested Citation

  • M. S. S. Namaki, 2014. "Credit Rating and Corporate Finance," Palgrave Macmillan Books, in: Strategic Thinking for Turbulent Times, chapter 5, pages 52-59, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-41400-7_6
    DOI: 10.1057/9781137414007_6
    as

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