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Regulatory versus Informational Value of Bond Ratings: Hints from History ..

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  • Ludovic Moreau

Abstract

A multivariate analysis can be used in order to investigate the relationship between bond yields, ratings and standard control variables. Replicating such a test on a number of cross-sections may evidence a possible impact of financial regulations relying on ratings. Datasets for American corporate bond issues allow a focus on two key events of the development of rating driven regulations: the valuation of bank and life insurance portfolios introduced in the 1930’s and the net capital requirements for broker dealers introduced in the 1970’s. The “value” of bond ratings does show some improvement once these regulations have been passed.

Suggested Citation

  • Ludovic Moreau, 2009. "Regulatory versus Informational Value of Bond Ratings: Hints from History ..," EconomiX Working Papers 2009-41, University of Paris Nanterre, EconomiX.
  • Handle: RePEc:drm:wpaper:2009-41
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    File URL: http://economix.fr/pdf/dt/2009/WP_EcoX_2009-41.pdf
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    Keywords

    Bond ratings; bond yields; financial regulation.;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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