This article examines how credit rating agencies (CRAs) react to rating decisions on mortgage-backed securities by rival agencies in the aftermath of the subprime crisis. While Fitch is on average the first mover, Moody's and S&P perform more timely downgrades given a downgrade or a more severe evaluation by a CRA other than Fitch, and they also influence Fitch more than they are influenced by it. Rating convergence is more likely when Fitch rather than the rival has to adjust its evaluation downwards. Our results support theoretical predictions on the role of reputation in explaining herding behavior among CRAs.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.