How Rating Agencies’ Market Power Affects Credit Rating Standards

By Mingyi Hung, Pepa Kraft, Shiheng Wang and Gwen Yu January 6, 2022 by renholding

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 …

The Triumph of a Local Focus in Troubled Times

By Samer Adra, Yang Gao and Jing-Ming Kuo August 16, 2021 by renholding

The emphasis on the contribution of local knowledge to economic growth is a key tenet of classical economic theory. The Hayekian worldview, for example, sees the dispersion of local pockets of knowledge across the economy as the primary reason why …

Commissioner Peirce Speaks to SEC Investor Advisory Committee

By Hester M. Peirce May 26, 2020 by renholding

Thank you Anne [Sheehan] and other members of the committee for arranging an impressive list of panelists to share their views and perspectives on the important topics on today’s agenda. The committee has not let COVID-19 stop it from holding

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Do Credit Rating Agencies Detect Accounting Frauds?

By Allen Huang, Pepa Kraft and Shiheng Wang September 13, 2019 by renholding

Accounting fraud imposes severe costs on firms and their stakeholders. Firms at which fraud occurs often have inefficient resource allocation and face higher cost of capital and regulatory penalties. While shareholders suffer the brunt of these damages, frauds can also …

Transparency and the (E)valuation of Asset-Backed Securities

By Jed J. Neilson, Stephen G. Ryan, K. Philip Wang and Biqin Xie December 13, 2018 by renholding

In 2011, the commission appointed by Congress to investigate the causes of the financial crisis concluded that “a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis” (The …

Investor-Paid Credit Ratings and Conflicts of Interest

By Leo Tang, Marietta Peytcheva and Pei Li November 14, 2018 by renholding

Credit ratings provide information regarding a company’s default probability. Ratings are relied upon extensively in regulation and private contracting and play a crucial role in the functioning of the capital markets. However, since the major credit rating agencies (CRAs) operate …

How Dodd-Frank’s Revision to Reg FD Affects the Timing of Credit Rating Issuance

By Ashiq Ali, Ningzhong Li and Hoyoun Kyung January 31, 2017 by renholding

Regulation Fair Disclosure (Regulation FD), implemented in 2000, prohibits U.S. public companies from disclosing non-public information selectively. Section 100(b)(2)(iii) of the regulation, however, allowed issuers to disclose non-public information to credit rating agencies (CRAs) for the purpose of determining or …

Director Networks and Credit Ratings

By Bradley W. Benson, Subramanian R. Iyer, Kristopher Kemper and Jing Zhao November 16, 2016 by renholding

In the aftermath of the most recent financial crisis, credit rating agencies (CRAs) once again received a portion of the blame. Similar to the negative CRA attention that followed the Asian Financial Crisis in 1997 and the dot.com bubble of …

Disclosure and Ratings Requirements in European Structured Finance

By Andrew E. Bryan June 14, 2013 by Jason Parsont

The newly amended credit rating agencies regulation coming into force on 20 June will expand the scope and application of disclosure requirements and other ratings related regulation for structured finance instruments – a concept wide enough to include many transactions

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