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The Private Use of Credit Ratings: Evidence from Investment Mandates

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  • Baghai, Ramin P.
  • Becker, Bo
  • Pitschner, Stefan

Abstract

Investment mandates are fundamental to the delegation of asset management. Mandates of fixed income mutual funds often use credit ratings to demarcate the investable universe. We examine changes in the use of credit ratings in these mandates since the financial crisis. The use of ratings in mandates has increased from an already high level before the crisis. Fixed income markets' extensive and continued reliance on credit ratings points to a lack of practically useful alternatives.

Suggested Citation

  • Baghai, Ramin P. & Becker, Bo & Pitschner, Stefan, 2018. "The Private Use of Credit Ratings: Evidence from Investment Mandates," CEPR Discussion Papers 13418, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13418
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    References listed on IDEAS

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    5. Baghai, Ramin P. & Becker, Bo, 2020. "Reputations and credit ratings: Evidence from commercial mortgage-backed securities," Journal of Financial Economics, Elsevier, vol. 135(2), pages 425-444.
    6. Ramin P. Baghai & Henri Servaes & Ane Tamayo, 2014. "Have Rating Agencies Become More Conservative? Implications for Capital Structure and Debt Pricing," Journal of Finance, American Finance Association, vol. 69(5), pages 1961-2005, October.
    7. Jess N. Cornaggia & Kimberly J. Cornaggia & John E. Hund, 2017. "Credit Ratings Across Asset Classes: A Long-Term Perspective," Review of Finance, European Finance Association, vol. 21(2), pages 465-509.
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    Cited by:

    1. Baghai, Ramin P. & Becker, Bo, 2020. "Reputations and credit ratings: Evidence from commercial mortgage-backed securities," Journal of Financial Economics, Elsevier, vol. 135(2), pages 425-444.
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    3. Abad, Pilar & Díaz, Antonio & Escribano, Ana & Robles, M.-Dolores, 2021. "Crossing boundaries beyond the investment grade: Induced trading by rating-contingent investment constraints," Journal of Corporate Finance, Elsevier, vol. 67(C).
    4. Josephson, Jens & Shapiro, Joel, 2020. "Credit ratings and structured finance," Journal of Financial Intermediation, Elsevier, vol. 41(C).

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    More about this item

    Keywords

    Credit ratings; delegated asset management; financial crisis; investment mandates;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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