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http://hdl.handle.net/10125/64911
Regulatory Reform, Multiple Credit Ratings and the Quality of the Corporate Information Environment
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HARC 2020 paper 243.pdf | 627.47 kB | Adobe PDF | View/Open |
Item Summary
Title: | Regulatory Reform, Multiple Credit Ratings and the Quality of the Corporate Information Environment |
Authors: | He Huang Jiri Svec Eliza Wu |
Keywords: | regulation Dodd-Frank credit ratings bonds earnings management show 1 morecorporate risk-taking show less |
Date Issued: | 31 Aug 2019 |
Abstract: | This paper examines the change in the regulatory use of multiple credit ratings after the Dodd-Frank Act (Dodd-Frank). We find that post Dodd-Frank reform firms are less likely to demand a third rating, which is typically provided by Fitch. Third ratings also become less informative with a much weaker market impact on credit spreads for firms on opposite sides of the high yield (HY) - investment grade (IG) boundary. Moreover, we find that post-Dodd-Frank, firms without external monitoring from a third ratings agency systematically manage their earnings more and have higher cash flow and sales volatilities. Overall, the results shed light on the unintended consequences of Dodd-Frank on competition within the ratings industry, the quality of the information environment, and the cost of borrowing for issuers. |
URI: | http://hdl.handle.net/10125/64911 |
Appears in Collections: |
05 Financial: Debt Market Research (Including Credit Ratings/Debt Contracts) |
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