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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26781
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| Title: | Rating Agencies: Is There an Agency Issue? |
| Authors: | Smith, Roy C.
Walter, Ingo |
| Issue Date: | Oct-2001 |
| Series/Report no.: | S-CDM-01-02 |
| Abstract: | This paper examines the potential for conflicts of interest in the debt
ratings business. Inherent in the current business model is the fact
that firms whose obligations are rated by the agencies pay fees for
those ratings, which in turn comprises virtually all of the revenues of
the rating agencies. Given the public nature of the ratings, no other
business model seems feasible for rating agencies as commercial
ventures, so that conflicts of interest are inherent in this important
part of the financial markets infrastructure. This paper examines the
nature of this conflict, how it is managed, and the significance of
market structure and reputation in preventing conflict exploitation.
These issues are linked to the use of ratings for regulatory
certification purposes, as well as the international dimensions of debt
ratings activity through investments and joint ventures of the major
rating groups. |
| URI: | http://hdl.handle.net/2451/26781 |
| Appears in Collections: | Credit & Debt Markets
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