The DOI matches its Crossref record; 33 of the 33 references it cites were found in a registry or an index.
Credit Ratings as Coordination Mechanisms
Open accessAbstract
In this article, we provide a novel rationale for credit ratings. The rationale that we propose is that credit ratings serve as a coordinating mechanism in situations where multiple equilibria can obtain. We show that credit ratings provide a “focal point” for firms and their investors, and explore the vital, but previously overlooked implicit contractual relationship between a credit rating agency (CRA) and a firm through its credit watch procedures. Credit ratings can help fix the desired equilibrium and as such play an economically meaningful role. Our model provides several empirical predictions and insights regarding the expected price impact of rating changes.
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Cites
Financial intermediation and delegated monitoring
Diamond, D. W. (1984) · The Review of Economic Studies · doi:10.2307/2297430 · Cited by 8,476
Holmstrom, B. (1982) · The Bell Journal of Economics · doi:10.2307/3003457 · Cited by 4,903
Business conditions and expected returns on stocks and bonds
Fama, E. F., & French, K. R. (1989) · Journal of Financial Economics · doi:10.1016/0304-405x(89)90095-0 · Cited by 3,933
Monitoring and reputation: The choice between bank loans and directly placed debt
Diamond, D. W. (1991) · Journal of Political Economy · doi:10.1086/261775 · Cited by 3,331
Optimal contracts and competitive markets with costly state verification
Townsend, R. M. (1979) · Journal of Economic Theory · doi:10.1016/0022-0531(79)90031-0 · Cited by 3,204
Incentive-Compatible Debt Contracts: The One-Period Problem
Gale, D., & Hellwig, M. (1985) · The Review of Economic Studies · doi:10.2307/2297737 · Cited by 1,796
Does the Source of Capital Affect Capital Structure?
Faulkender, M., & Petersen, M. A. (2006) · Review of Financial Studies · doi:10.1093/rfs/hhj003 · Cited by 1,375
The Effect of Bond Rating Agency Announcements on Bond and Stock Prices
Hand, J. R. M., Holthausen, R. W., & Leftwich, R. (1992) · The Journal of Finance · doi:10.1111/j.1540-6261.1992.tb04407.x · Cited by 975
The effect of bond rating changes on common stock prices
Holthausen, R. W., & Leftwich, R. (1986) · Journal of Financial Economics · doi:10.1016/0304-405x(86)90006-1 · Cited by 720
Information sharing, lending and defaults: Cross-country evidence
Jappelli, T., & Pagano, M. (2002) · Journal of Banking & Finance · doi:10.1016/s0378-4266(01)00185-6 · Cited by 672
Cited by
BOLTON, P., FREIXAS, X., & SHAPIRO, J. (2012) · The Journal of Finance · doi:10.1111/j.1540-6261.2011.01708.x · Cited by 940
Rating agencies in the face of regulation
Opp, C. C., Opp, M. M., & Harris, M. (2013) · Journal of Financial Economics · doi:10.1016/j.jfineco.2012.10.011 · Cited by 382
Metadata
- Authors
- Boot, A. W. A., Milbourn, T. T., & Schmeits, A.
- Venue
- Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2005-12-19
- Volume
- 19
- Issue
- 1
- Pages
- 81-118
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W3123261008
- Cited by
- 482
- References
- 33
- FWCI
- 24.99
- Type
- journal article
- Language
- en
- Open access
- green
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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