TY  - UNPD
A1  - Bannier, Christina E.
A1  - Tyrell, Marcel
T1  - Modelling the role of credit rating agencies : Do they spark off a virtuous circle?
T2  - Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 160
N2  - In this paper, we propose a model of credit rating agencies using the global games framework to incorporate information and coordination problems. We introduce a refined utility function of a credit rating agency that, additional to reputation maximization, also embeds aspects of competition and feedback effects of the rating on the rated firms. Apart from hinting at explanations for several hypotheses with regard to agencies' optimal rating assessments, our model suggests that the existence of rating agencies may decrease the incidence of multiple equilibria. If investors have discretionary power over the precision of their private information, we can prove that public rating announcements and private information collection are complements rather than substitutes in order to secure uniqueness of equilibrium. In this respect, rating agencies may spark off a virtuous circle that increases the efficiency of the market outcome.
T3  - Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting - 160 
KW  - information production
KW  - rating agencies
KW  - coordination problems
KW  - global game
Y1  - 2005
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/2798
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-26093
PB  - Univ., Fachbereich Wirtschaftswiss.
CY  - Frankfurt am Main
ER  -