How Rating Agencies’ Market Power Affects Credit Rating Standards

Global credit rating agencies (CRAs) like S&P and Moody’s are important gatekeepers for the debt market. The demand for their ratings has increased at an unprecedented rate in the past two decades due to an extraordinary growth in cross-border debt financing. While the global CRAs’ market dominance has been the subject of considerable attention and regulatory debate, we know little about how their overall market power affects rating standards and quality. One reason is that prior studies generally focus on the U.S. market, where S&P and Moody’s already command a more than 90 percent  share. In a forthcoming paper, … Read more