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' 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. JEL: G14, G29, G33
| Author: | Christian Hirsch, Christina E. Bannier |
|---|---|
| URN: | urn:nbn:de:hebis:30-54248 |
| Series (Serial Number) | Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (184) |
| Document Type: | Working Paper |
| Language: | English |
| Date of Publication (online): | 04.04.2008 |
| Year of first Publication: | 2008 |
| Publishing Institution: | Univ.-Bibliothek Frankfurt am Main |
| Tag: | credit rating agencies ; event study; market reactions ; watchlist |
| HeBIS PPN: | 197637132 |
| Institutes: | Wirtschaftswissenschaften |
| Dewey Decimal Classification: | 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Veröffentlichungsvertrag für Publikationen ohne Print on Demand |
