Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104266
Authors: 
Forster, Josef
Year of Publication: 
2008
Series/Report no.: 
Munich Discussion Paper 2008-14
Abstract: 
Credit rating agencies (CRAs) very often have been criticized for announcing inaccurate credit ratings and are suspected of being exposed to conflicts of interest. Despite these objections CRAs remained largely unregulated. Based on Pagano & Immordino (2007), we study the optimal regulation of CRAs in a model where rating quality is unobservable and enforcing regulation is costly. The model shows that minimum rating standards increase the social value of credit ratings. The model also analyzes implications for regulation in the presence of conflicts of interest between the CRA and the rated clients by direct bribes and by the joint provision of rating and consulting services.
Subjects: 
credit rating agencies
regulation
conflicts of interest
JEL: 
G20
G24
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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