The Relationship Between Pricing Policies and Measures of the Economic Independence of Rating Agencies: Evidence from Fitch, Moody's and S&P

Rating agencies normally apply an issuer-pay model, which is acknowledged as a possible source of collusion risk. In order to control this risk, raters are requested to monitor only the yearly top customers’ revenues, without considering the value of multi-period relationships.Looking at Fitch, Moody’s and S&P customers for the time horizon 1999–2008, this paper evaluates the sensitivity of different concentration measures to the pricing policy adopted, highlighting the greater fitness of more comprehensive measures. The results also show that a multi-period horizon is less sensitive to changes in the discounting policy and more suitable for regulatory purposes.