Certifier Competition and Product Quality

Bizzotto, Jacopo

doi:10.2139/ssrn.2707238

Cited by 2 publications

(1 citation statement)

References 10 publications

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“…29 Alternatively, the analysis could be extended to study how different compensation schemes fare in markets in which each firm hires a rating agency multiple times. 30 29 Previous work on the effect of market structure on the quality of ratings includes Strausz (2005), Faure-Grimaud, Peyrache and Quesada ( 2009), Bolton, Freixas and Shapiro (2012), Doherty, Kartasheva and Phillips (2012), Bouvard and Levy (2018), Hirth (2014), andBizzotto (2014).…”

Section: Discussionmentioning

confidence: 99%

Fees, Reputation, and Information Production in the Credit Rating Industry

Bizzotto

Vigier

2021

American Economic Journal: Microeconomics

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We compare a credit rating agency’s incentives to acquire costly information when it is only paid for giving favorable ratings to the corresponding incentives when the agency is paid up-front, i.e., irrespective of the ratings assigned. We show that, in the presence of moral hazard, contingent fees provide stronger dynamic incentives to acquire information than up-front fees and may induce higher social welfare. When the fee structure is chosen by the agency, contingent fees arise as an equilibrium outcome, in line with the way the market for credit rating actually works. (JEL D21, D82, D83, G24)

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Section: Discussionmentioning

confidence: 99%

Fees, Reputation, and Information Production in the Credit Rating Industry

Bizzotto

Vigier

2021

American Economic Journal: Microeconomics

Self Cite

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Fees, Reputation and Information Production in the Credit Rating Industry

Bizzotto

Vigier

2018

SSRN Journal

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We compare a credit rating agency's incentives to acquire costly information when it is only paid for giving favorable ratings to the corresponding incentives when the agency is paid upfront, i.e. irrespective of the ratings assigned. We show that, in the presence of moral hazard, contingent fees provide stronger dynamic incentives to acquire information than upfront fees and may induce higher social welfare. When the fee structure is chosen by the agency, contingent fees arise as an equilibrium outcome, in line with the way the market for credit rating actually works.

show abstract

Certifier Competition and Product Quality

Cited by 2 publications

References 10 publications

Fees, Reputation, and Information Production in the Credit Rating Industry

Fees, Reputation, and Information Production in the Credit Rating Industry

Fees, Reputation and Information Production in the Credit Rating Industry

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