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The Ownership of ratings

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.
Keywords : Ownership ratings
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https://hal-hec.archives-ouvertes.fr/hal-00491667
Contributor : Antoine Haldemann <>
Submitted on : Monday, June 14, 2010 - 10:17:16 AM
Last modification on : Thursday, January 11, 2018 - 6:19:31 AM

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Eloïc-Anil Peyrache, Antoine Faure-Grimaud, Lucia Quesada. The Ownership of ratings. The RAND Journal of Economics, 2009, Vol.40,nº2, pp.234-257. ⟨10.1111/j.1756-2171.2009.00063.x⟩. ⟨hal-00491667⟩

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