SOLICITED VERSUS UNSOLICITED RATINGS: THE ROLE OF SELECTION
This paper analyzes the extent to which selection explains the observed discrepancy between solicited and unsolicited ratings. I propose a model of selection with truth telling rating agencies and borrowers with the ability to veto the revelation of the rating. The observed difference between the tw...
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| Format: | Article |
| Language: | English |
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World Scientific Publishing
2019-12-01
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| Series: | Journal of Financial Management, Markets and Institutions |
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| Online Access: | http://www.worldscientific.com/doi/epdf/10.1142/S2282717X19500051 |
| Summary: | This paper analyzes the extent to which selection explains the observed discrepancy between solicited and unsolicited ratings. I propose a model of selection with truth telling rating agencies and borrowers with the ability to veto the revelation of the rating. The observed difference between the two categories of ratings in different sectors is in line with the prediction of the model. In the sovereign market there is a positive selection of borrowers into unsolicited ratings whereas other sectors have, on the contrary, lower unsolicited rating grades than those solicited. |
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| ISSN: | 2282-717X |