재무연구 제 권 호 (2011년 9월)
Asian Review of Financial Research, Vol., No..
pp.1287~1330
pp.1287~1330
Is Banking Credit Rating Trustable: Competition and Quality ? Global Evidence
한국재무학회
This study empirically investigates the effect of increased competition among three credit rating agencies S&P, Fitch and Moody’sduring 2002 to 2010 on credit rating quality. This results show CRAs assign more favorable credit ratings to banks assigned ratings from two or three CRAs; i.e., credit rating quality declines when CRAs face increased competition. Second, the negative effect of increased competition on credit rating quality is more significant in the case of ratings by Fitch. Third, the significant increase in the number of banks assigned ratings after 2007 increases the negative effect of increased competition on credit rating quality. The high market share of Fitch mitigates the negative effect of competition on credit rating quality in developing countries. Using changes in credit ratings to proxy for credit rating quality yields consistent results.
This study empirically investigates the effect of increased competition among three credit rating agencies S&P, Fitch and Moody’sduring 2002 to 2010 on credit rating quality. This results show CRAs assign more favorable credit ratings to banks assigned ratings from two or three CRAs; i.e., credit rating quality declines when CRAs face increased competition. Second, the negative effect of increased competition on credit rating quality is more significant in the case of ratings by Fitch. Third, the significant increase in the number of banks assigned ratings after 2007 increases the negative effect of increased competition on credit rating quality. The high market share of Fitch mitigates the negative effect of competition on credit rating quality in developing countries. Using changes in credit ratings to proxy for credit rating quality yields consistent results.
