| Item Type |
Journal paper
|
| Abstract |
We empirically investigate the benefits of multiple ratings not only at issuance of debt instruments but also during the subsequent monitoring phase. Using a record of monthly credit rating migration data on all U.S. residential mortgage-backed securities rated by Standard & Poor's, Moody's, and Fitch between 1985 and 2012 (154'600 tranches), our results provide em-pirical evidence that rating agencies put more effort in rating and outlook revisions when tranches have assigned multiple ratings. Furthermore, we demonstrate that in the case of mul-tiple ratings, agencies do a better job in discriminating tranches with respect to default risk. On the downside, we observe a shift in collateral towards senior tranches and incentives for issuers to engage in rating shopping activities, but find no evidence that rating agencies exploit such behavior to attract more rating business. Our results contribute to the literature on information production of credit ratings and extend the perspective to the monitoring period after issuance. |
| Authors |
Morkötter, Stefan; Stebler, Roman & Westerfeld, Simone |
| Journal or Publication Title |
Journal of Banking and Finance |
| Language |
English |
| Keywords |
Multiple Ratings, Information Production, Structured Finance, Rating Agencies, Residential Mortgage-backed Securities, Rating Shopping |
| Subjects |
business studies
finance |
| HSG Classification |
contribution to scientific community |
| Refereed |
No |
| Date |
February 2017 |
| Publisher |
Elsevier |
| Place of Publication |
Amsterdam |
| Series Name |
School of Finance Working Paper Series |
| Volume |
75 |
| Page Range |
235-257 |
| Number of Pages |
23 |
| ISSN |
0378-4266 |
| ISSN-Digital |
1872-6372 |
| Publisher DOI |
https://doi.org/10.1016/j.jbankfin.2016.09.001 |
| Depositing User |
Prof. Dr. Simone Westerfeld
|
| Date Deposited |
09 Mar 2015 12:20 |
| Last Modified |
20 Jul 2022 17:24 |
| URI: |
https://www.alexandria.unisg.ch/publications/239753 |
Competition in the Credit Rating Industry: Benefits for Investors and Issuers
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