Publications

December 2021
Article

Partisan Professionals: Evidence from Credit Rating Analysts

By: Elisabeth Kempf and Margarita Tsoutsoura

Partisan perception affects the actions of professionals in the financial sector. Using a novel dataset linking credit rating analysts to party affiliations from voter records, we show that analysts who are not affiliated with the U.S. president’s party downward-adjust... View Details

Keywords: Political Affiliation; Credit Rating Agencies; Political Partisanship; Political Elections; Perception; Credit

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2021
Working Paper

International Evidence on the Effects of a Local Presence by U.S. Credit Rating Agencies

By: Liran Eliner, Michael Machokoto and Anywhere Sikochi

Major U.S. credit rating agencies are criticized for failing to understand developments in other economies and thereby impeding capital access by assigning lower ratings. Consistent with this, we find that Moody's and S&P credit ratings are more favorable after the... View Details

Keywords: Credit Rating Agencies; Credit Ratings; Rating Adjustments; Rating Disagreement; Geographic Proximity; Soft Information; Credit; Geographic Location; Local Range

SSRN

2016
Working Paper

Credit Migration and Covered Interest Rate Parity

By: Gordon Y Liao

I document economically large and persistent discrepancies in the pricing of credit risk between corporate bonds denominated in different currencies. The discrepancies amount to 50-100 basis points on trillions of dollars of debt notional. I relate this violation of... View Details

Keywords: Market Segmentation; Debt Issuance; Covered Interest Rate Parity; Cross-currency Basis; Credit Risk; Financial Markets; Credit

September 2008 (Revised September 2011)
Background Note

Note: Credit Rating Agencies

By: William E. Fruhan

The note examines the role of credit rating agencies in capital markets, with emphasis on the role of these agencies in the recent credit crisis and recommendations for change. View Details

Keywords: Financial Crisis; Capital Markets; Credit; Governing Rules, Regulations, and Reforms; Standards

January 2020
Article

The Job Rating Game: Revolving Doors and Analyst Incentives

By: Elisabeth Kempf

Investment banks frequently hire analysts from rating agencies. While many argue that this "revolving door" creates captured analysts, it can also create incentives to improve accuracy. To study this issue, I construct an original dataset, linking analysts to their... View Details

Keywords: Credit Rating Agencies; Investment Banking; Recruitment; Performance Evaluation; Financial Services Industry

August 2023
Article

Do Rating Agencies Behave Defensively for Higher Risk Issuers?

By: Samuel B. Bonsall IV, Kevin Koharki, Pepa Kraft, Karl A. Muller III and Anywhere Sikochi

We examine whether rating agencies act defensively toward issuers with a higher likelihood of default. We find that agencies' qualitative soft rating adjustments are more accurate as issuers' default risk grows, as evidenced by the adjustments leading to lower Type I... View Details

Keywords: Credit Rating Agencies; Soft Rating Adjustments; Default; Credit; Performance Evaluation; Measurement and Metrics; Financial Institutions; Risk Management

2015
Working Paper

Implied Materiality and Material Disclosures of Credit Ratings

By: Robert G. Eccles and Tim Youmans

This first of three papers in our series on materiality in credit ratings will examine the materiality of credit ratings from an "implied materiality" and governance disclosure perspective. In the second paper, we will explore the materiality of environmental, social,... View Details

Keywords: Governance; Markets; Credit

SSRN

31 Aug 2009
Research & Ideas

Why Competition May Not Improve Credit Rating Agencies

In the run-up to the global financial crisis, credit rating agencies gave high marks to such risky financial vehicles as collateralized debt obligations, which few people understood. It has been argued that... View Details

Keywords: by Martha Lagace; Financial Services

13 Apr 2015
Working Paper Summaries

Implied Materiality and Material Disclosures of Credit Ratings

Keywords: by Robert G. Eccles & Tim Youmans; Financial Services; Accounting

Fast Answer

Securitization process and credit rating agencies

What resources are available on the securitization process, credit rating agencies and European covered bonds? Databases Bloomberg - Use Mortgages function to get information on various forms of... View Details

April 2012
Case

Credit Rating Agency Reform in the US and EU

By: Robert C. Pozen and Brian Conroy

The purpose of this note is to explore reform options for the credit rating industry. The note examines the ways in which credit rating agencies contributed to the recent financial crisis, particularly through ratings of securitized products and sovereign debt. It... View Details

Keywords: Debt Securities; Financial Condition; Standards; Financial Crisis; Corporate Finance; Financial Services Industry; United States; European Union

January 2005 (Revised October 2005)
Case

Private Capital and Public Policy: Standard & Poor's Sovereign Credit Ratings

By: Rawi E. Abdelal and Christopher Bruner

Describes Standard & Poor's sovereign credit ratings business. Provides background on the history of credit ratings agencies, the meaning of credit ratings, the expansion of the sovereign ratings business over recent decades, and the market for credit ratings. Also,... View Details

Keywords: Sovereign Finance; History; Policy; Business and Government Relations; International Finance; Country; Globalized Economies and Regions; Decision Choices and Conditions; Capital Markets; Debates; Financial Services Industry; United States

22 Jul 2009
Working Paper Summaries

Reputation and Competition: Evidence from the Credit Rating Industry

Keywords: by Bo Becker & Todd Milbourn; Financial Services

13 Jun 2012
HBS Case

HBS Cases: A Startup Takes On the Credit Ratings Giants

For most of the 20th century, three bond ratings agencies—Moody's, Fitch, and Standard & Poor's—dominated the credit ratings industry, recently controlling 97 percent of... View Details

Keywords: by Maggie Starvish; Banking; Financial Services

Research Summary

Credit markets

Bond market; Bank lending; Credit markets institutions; Credit ratings View Details

Article

Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints

By: Luis Garicano and Claudia Steinwender

We introduce a novel empirical strategy to measure the size of credit shocks. Theoretically, we show that credit shocks reduce the value of long-term relative to short-term investments. Empirically, we can therefore compare the reduction of long-term relative to... View Details

Keywords: Credit Constraints; Credit Crunch; Spain; Investment Behavior; Credit Squeeze; Financial Crisis; Economic Growth; Investment; Credit; Manufacturing Industry; Spain; European Union

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2015
Chapter

Just Who Put You in Charge? We Did: Credit Rating Agencies and the Politics of Ratings

By: Rawi Abdelal and Mark Blyth

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May 2005 (Revised November 2005)
Background Note

Note on Credit Derivatives

Provides the basic underlying model for credit risk analysis, as well as covers basic credit risk derivatives, such as asset swaps, credit default swaps, total return of rate swaps, and credit spread options. View Details

Keywords: Credit Derivatives and Swaps; Risk and Uncertainty; Credit