Imperial College London
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DrLaraCathcart

Business School

Associate Professor of Finance
 
 
 
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Contact

 

+44 (0)20 7594 9126l.cathcart

 
 
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Location

 

3.0953 Prince's GateSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Bedendo:2017:10.1016/j.jfs.2017.12.003,
author = {Bedendo, M and Cathcart, L and El-Jahel, L},
doi = {10.1016/j.jfs.2017.12.003},
journal = {Journal of Financial Stability},
pages = {44--60},
title = {Reputational shocks and the information content of credit ratings},
url = {http://dx.doi.org/10.1016/j.jfs.2017.12.003},
volume = {34},
year = {2017}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - We investigate how shocks to the reputation of credit rating agencies and the subsequent introduction of stricter regulation affect investors’ reaction to rating signals. We focus on three major episodes of reputational distress: the Enron/WorldCom scandals, the subprime crisis and the lawsuit against Standard & Poor's. We document a stronger response of stock investors to downgrades in the aftermath of reputational shocks, which is not, however, accompanied by an improvement in rating quality. Our results are consistent with a scenario where, following evidence of misrating, market investors conclude that ratings are generally overstated and infer greater negative information from downgrades. The effect is stronger for the investment-grade segment, where rating errors have a wider reputational impact. The introduction of new regulatory measures such the SOX Act, the CRA Reform Act and the Dodd-Frank Act, seems instead to improve rating quality and soften investors’ response.
AU  - Bedendo,M
AU  - Cathcart,L
AU  - El-Jahel,L
DO  - 10.1016/j.jfs.2017.12.003
EP  - 60
PY  - 2017///
SN  - 1572-3089
SP  - 44
TI  - Reputational shocks and the information content of credit ratings
T2  - Journal of Financial Stability
UR  - http://dx.doi.org/10.1016/j.jfs.2017.12.003
UR  - http://hdl.handle.net/10044/1/55313
VL  - 34
ER  -
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