Bonuses, Credit Rating Agencies and the Credit Crunch
The payment of bonuses can bring big benefits. But harm, too, can result. In the financial sector, this is especially true, above all when they are related to noisy indicators of performance over brief periods. This paper starts by exploring these ideas, then proceeds to examine credit rating agencies and their role in the 2007 credit crunch. It emphasizes the paucity of long term high frequency financial data to quantify tail event risks, the failure to apply analysis of fundamentals in financial and housing markets, and rewards structures to individual players that reinforced myopia as three key components of the crisis.
|Date of creation:||Sep 2008|
|Contact details of provider:|| Postal: Department of Economics, University of St. Andrews, Fife KY16 9AL|
Phone: 01334 462436
Fax: 01334 462444
Web page: https://www.st-andrews.ac.uk/cdma
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:san:cdmacp:0805. 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: (the School of Economics)
If references are entirely missing, you can add them using this form.