Herding behavior and rating convergence among credit rating agencies: evidence from the subprime crisis

Lugo, Stefano, Croce, Annalisa and Faff, Robert (2015) Herding behavior and rating convergence among credit rating agencies: evidence from the subprime crisis. Review of Finance, 19 4: 1703-1731. doi:10.1093/rof/rfu028


Author Lugo, Stefano
Croce, Annalisa
Faff, Robert
Title Herding behavior and rating convergence among credit rating agencies: evidence from the subprime crisis
Journal name Review of Finance   Check publisher's open access policy
ISSN 1573-692X
1572-3097
Publication date 2015-07-01
Year available 2014
Sub-type Article (original research)
DOI 10.1093/rof/rfu028
Open Access Status Not Open Access
Volume 19
Issue 4
Start page 1703
End page 1731
Total pages 29
Place of publication Oxford, United Kingdom
Publisher Oxford University Press
Collection year 2016
Language eng
Abstract 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.
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2016 Collection
UQ Business School Publications
 
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