The Credibility of Credit Ratings
Journal Title: Dezbateri social economice - Year 2015, Vol 4, Issue 1
Abstract
Credit rating agencies (CRAs) are found to strongly influence the market participants’ decisions. Therefore it is essential to make their assessments credible and accurate. The financial crisis proved that this condition was not met relating to the US financial market. The paper focuses on the case of Lehman Brothers Holding which may be treated as a kind of ‘natural experiment’ – the collapse of this bank is an absolute evidence of its poor condition. Thus, verifying the credibility of ratings requires only reviewing the rating agencies’ assessments in the pre-bankruptcy period. The author finds that, firstly, the grades didn’t reflect the bad situation sufficiently and secondly, the CRAs responded with a great delay to the detoriating market circumstances.
Authors and Affiliations
Emilia Klepczarek
Keywords
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