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Does Reputation still Matter to Credit Rating Agencies?

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Global Financial Crisis and Its Ramifications on Capital Markets

Part of the book series: Contributions to Economics ((CE))

Abstract

The purpose of this study is to analyze and critically review the role of credit rating agencies in financial markets. The remarkable disappointment of top-rated structured finance products in the subprime crisis has placed renewed attention on credit rating agencies. As a result of this development, the ongoing debate about whether market forces provide sufficient control of rating agencies or whether regulation is necessary has been rekindled. The discussion focuses on the argument that the reputation of a credit rating agency is sufficient to discipline them. This essay contributes to this debate by providing a behavioral perspective. The introduction provides a brief historical overview and examines the role of credit rating agencies in financial markets. The second section addresses the role of rating agencies in the subprime crisis by highlighting the conflict of interest problem, ratings quality and regulation. The next section analyzes the effects of US- and EU-based regulations. The main contribution of this paper is made in the last section, which points out the behavioral perspective on credit ratings.

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Authors and Affiliations

  1. Faculty of Business, Department of Banking and Finance, Istanbul Commerce University, Sutluce Campus, Beyoglu, 34445, Istanbul, Turkey

    Serkan Cankaya

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  1. Serkan Cankaya
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Correspondence to Serkan Cankaya .

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Editors and Affiliations

  1. Istanbul Medipol University, Istanbul, Turkey

    Ãœmit HacioÄŸlu

  2. Istanbul Medipol University, Istanbul, Turkey

    Hasan Dinçer

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Cankaya, S. (2017). Does Reputation still Matter to Credit Rating Agencies?. In: Hacioğlu, Ü., Dinçer, H. (eds) Global Financial Crisis and Its Ramifications on Capital Markets. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-47021-4_31

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