Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 11, 2011 erstellt
Beschreibung:
Do rating agencies increase or decrease financial market stability? This paper analyzes whether credit rating agencies may help to avoid inefficient self-fulfilling credit defaults. If investors follow risk-dominant strategies, we show that rating announcements and investors' private information are complements as far as highly-rated entities are concerned. This helps to stabilize investment behavior and increase efficiency. Rating agencies may even spark off a virtuous circle that increases aggregate information precision. Lack of private information, however, endangers market stability and may trigger credit crises. For lowly-rated entities the opposite holds as private information turns into a substitute for the agencies' services