The impact of ESMA regulatory identifiers on the quality of ratings
Research output: Contribution to journal › Article › peer-review
Electronic versions
Documents
- IRFA-R&R-ESMA identifiers 110419
Accepted author manuscript, 148 KB, Word document
Licence: CC BY-NC-ND Show licence
- 2019 The impact of ESMA regulatory identifiers
Accepted author manuscript, 468 KB, PDF document
Licence: CC BY-NC-ND Show licence
DOI
This paper investigates the impact of the introduction of ESMA credit rating identifiers on the quality of ratings. These identifiers form part of the disclosure requirements placed upon credit rating agencies (CRAs) since 2012 under a new EU regulatory regime and have not featured in any prior empirical literature. Rating informativeness is gauged from bond market data. Using a rich dataset of sovereign rating actions by the three major CRAs for 70 countries during the period 2006–2016, we find that the ESMA requirement for identifiers yields varying outcomes across downgrades and upgrades. The rating quality associated with downgrades by Moody's improves, whereas upgrades by S&P, Moody's and Fitch are of lower quality. These results are consistent with greater conservatism in rating policies after the regulatory reforms. ESMA's additional focus on analyst location does not reveal any consistent difference in the quality of ratings.
Keywords
- Rating agency reulation, ESMA identifiers, Quality of ratings, Analyst location
Original language | English |
---|---|
Article number | 101365 |
Journal | International Review of Financial Analysis |
Volume | 66 |
Early online date | 12 Jun 2019 |
DOIs | |
Publication status | Published - Nov 2019 |
Total downloads
No data available