Market for sovereign ratings is oligopolistic, but it is evolving to become less concentrated. However, decreasing market concentration has significant implications for the quality of sovereign ratings. Using a global dataset of sovereign ratings assigned by S&P, Moody’s, Fitch and Dominion Bond Rating Service (DBRS) during the period of 2000-2016, we find that S&P and Moody’s inflate (deflate) their ratings in response to the increase in Fitch’s (DBRS’s) market share in the previous year. DBRS employs a generous rating policy to succeed in this market. Imposing a regulatory pressure on CRAs weakens their motivation to inflate ratings to win market shares. Their rating strategies also vary across economic cycles. Key
|Publication status||Unpublished - 2018|
|Event||The Seventeenth European Economics and Finance Society Conference - City University of London, London, United Kingdom|
Duration: 21 Jun 2018 → 24 Jun 2018
|Conference||The Seventeenth European Economics and Finance Society Conference|
|Abbreviated title||EEFS conference|
|Period||21/06/18 → 24/06/18|
Vu, H., Alsakka, R., & ap Gwilym, O. (2018). Are Sovereign Credit Ratings Inflated by Competition?. Paper presented at The Seventeenth European Economics and Finance Society Conference, London, United Kingdom.