Does observability of ratings shopping improve ratings quality?

IF 0.4 Q4 ECONOMICS
Sanjay Kallapur, Abdul Khizer, Hariom Manchiraju, Rajesh Vijayaraghavan
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引用次数: 0

Abstract

Ratings shopping is a well-documented cause for ratings inflation by credit rating agencies (CRAs). Its unobservability makes it difficult for market participants to undo it. In this paper, we exploit a unique regulation in India that requires CRAs to disclose ratings that were solicited but were eventually rejected by issuers. This regulation, which aims to enhance the transparency in the ratings process, allows us to empirically examine whether these disclosures influence ratings shopping and, consequently, ratings inflation. We find that the disclosure requirements result in an increase in the incidence of future downgrades and type 1 errors and a decrease in the occurrence of type 2 errors. These results are consistent with the view that the enhanced disclosure requirement did not reduce shopping and instead led to unintended consequences, such as an increase in implicit shopping, where issuers selectively engage lenient CRAs to obtain favorable ratings.
评价购物的可观察性是否提高了评价质量?
评级购物是信用评级机构(CRAs)评级膨胀的一个充分证明的原因。它的不可观察性使得市场参与者很难撤销它。在本文中,我们利用了印度的一项独特法规,该法规要求评级机构披露被征求但最终被发行人拒绝的评级。这一规定旨在提高评级过程的透明度,使我们能够实证地检查这些披露是否影响评级购买,从而影响评级通胀。我们发现,披露要求导致未来降级和第一类错误的发生率增加,而第二类错误的发生率减少。这些结果与以下观点一致,即增强的披露要求并没有减少购买,而是导致了意想不到的后果,例如隐性购买的增加,即发行人选择性地与宽松的评级机构合作以获得有利评级。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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