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The game changer: Regulatory reform and multiple credit ratings
- Source :
- Journal of Banking and Finance
- Publication Year :
- 2021
- Publisher :
- Elsevier BV, 2021.
-
Abstract
- This paper examines the change in the regulatory use of multiple credit ratings after the Dodd-Frank Act (Dodd-Frank). We find that post Dodd-Frank reform, firms are less likely to demand a third rating (typically from Fitch) for ratings near the high yield (HY) - investment grade (IG) boundary to support their new corporate bond issues. Third ratings also become less informative post Dodd-Frank, with a much weaker market impact on credit spreads for firms with S&P and Moody's ratings on opposite sides of the HY-IG rating boundary. We provide new evidence on the effect of Dodd-Frank in curbing corporate borrowers’ strategic use of multiple credit ratings near this boundary.
- Subjects :
- 040101 forestry
Economics and Econometrics
050208 finance
Yield (finance)
05 social sciences
1502 Banking, Finance and Investment
04 agricultural and veterinary sciences
Regulatory reform
Monetary economics
Investment (macroeconomics)
Boundary (real estate)
corporate bonds
Corporate bond
Dodd-Frank
Credit rating
0502 economics and business
Economics
0401 agriculture, forestry, and fisheries
credit ratings
Financial regulation
Market impact
Finance
Subjects
Details
- ISSN :
- 03784266
- Volume :
- 133
- Database :
- OpenAIRE
- Journal :
- Journal of Banking & Finance
- Accession number :
- edsair.doi.dedup.....087a6448c104107eab26e5f4fe617542