Location of Repository

The ownership of ratings

By Antoine Faure-Grimaud, Eloïc Peyrache and Lucía Quesada

Abstract

We identify the optimal contract between a rating agency and a firm and the circumstances under which simple ownership contracts implement this optimal solution. We assume that the decision to obtain a rating is endogenous and the price of a rating is a strategic variable. Clients hiding their ratings can be an equilibrium only if they are ex ante uncertain of their quality and if the hiring decision is not observable. For some distribution functions, a competitive rating market is necessary for this result to obtain. In this context, competition between rating intermediaries will lead to less information in equilibrium. Copyright (c) 2009, RAND.

DOI identifier: 10.1111/j.1756-2171.2009.00063.x
OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.blackwell-synergy.c... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.