Abstract
We exploit an investor-paid rating agency's designation as a Nationally Recognized Statistical Rating Organization (NRSRO) to test whether this certification affects the agency's information production. We use a certified issuer-paid agency as a benchmark and find robust evidence that the investor-paid agency's ratings policy - both timelier and more symmetric with respect to positive and negative information - persists after it became certified for regulatory compliance. Our results suggest that ratings policy is more a function of rating agency compensation structure than the NRSRO certification by the U.S. Securities and Exchange Commission.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1578-1597 |
| Number of pages | 20 |
| Journal | Management Science |
| Volume | 62 |
| Issue number | 6 |
| DOIs | |
| State | Published - Jun 2016 |
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All Science Journal Classification (ASJC) codes
- Strategy and Management
- Management Science and Operations Research
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Does regulatory certification affect the information content of credit ratings? / Bruno, Valentina; Cornaggia, Jess; Cornaggia, Kimberly J.
In: Management Science, Vol. 62, No. 6, 06.2016, p. 1578-1597.Research output: Contribution to journal › Article
TY - JOUR
T1 - Does regulatory certification affect the information content of credit ratings?
AU - Bruno, Valentina
AU - Cornaggia, Jess
AU - Cornaggia, Kimberly J.
PY - 2016/6
Y1 - 2016/6
N2 - We exploit an investor-paid rating agency's designation as a Nationally Recognized Statistical Rating Organization (NRSRO) to test whether this certification affects the agency's information production. We use a certified issuer-paid agency as a benchmark and find robust evidence that the investor-paid agency's ratings policy - both timelier and more symmetric with respect to positive and negative information - persists after it became certified for regulatory compliance. Our results suggest that ratings policy is more a function of rating agency compensation structure than the NRSRO certification by the U.S. Securities and Exchange Commission.
AB - We exploit an investor-paid rating agency's designation as a Nationally Recognized Statistical Rating Organization (NRSRO) to test whether this certification affects the agency's information production. We use a certified issuer-paid agency as a benchmark and find robust evidence that the investor-paid agency's ratings policy - both timelier and more symmetric with respect to positive and negative information - persists after it became certified for regulatory compliance. Our results suggest that ratings policy is more a function of rating agency compensation structure than the NRSRO certification by the U.S. Securities and Exchange Commission.
UR - http://www.scopus.com/inward/record.url?scp=84975129571&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84975129571&partnerID=8YFLogxK
U2 - 10.1287/mnsc.2015.2188
DO - 10.1287/mnsc.2015.2188
M3 - Article
AN - SCOPUS:84975129571
VL - 62
SP - 1578
EP - 1597
JO - Management Science
JF - Management Science
SN - 0025-1909
IS - 6
ER -