The economics of rating watchlists: evidence from rating changes

Generally, information provision and certifcation have been identified as the major economic functions of rating agencies. This paper analyzes whether the “watchlist” (rating review) instrument has extended the agencies'
Generally, information provision and certifcation have been identified as the major economic functions of rating agencies. This paper analyzes whether the “watchlist” (rating review) instrument has extended the agencies' role towards a monitoring position, as proposed by Boot, Milbourn, and Schmeits (2006). Using a data set of Moody's rating history between 1982 and 2004, we find that the overall information content of rating action has indeed increased since the introduction of the watchlist procedure. Our findings suggest that rating reviews help to establish implicit monitoring contracts between agencies and borrowers and as such enable a finer partition of rating information, thereby contributing to a higher information quality.
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Metadaten
Author:Christian Hirsch, Christina E. Bannier
URN:urn:nbn:de:hebis:30-54248
Parent Title (English):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 184
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (184)
Publisher:Univ., Fachbereich Wirtschaftswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2008
Year of first Publication:2008
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2008/04/04
Tag:credit rating agencies; event study; market reactions; watchlist
SWD-Keyword:Checkliste; Rating
Issue:Version Dezember 2007
HeBIS PPN:197637132
Institutes:Wirtschaftswissenschaften
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:G14 Information and Market Efficiency; Event Studies
G29 Other
G33 Bankruptcy; Liquidation
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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