Rating Quality: A Literature Review

Abstract

This paper reviews the theoretical and empirical literature dealing with the current topic of rating quality. Due to the close interrelation of ratings with the financial system, it is crucial to understand what exactly determines their accuracy. To provide a unique and holistic overview on central insights from recent research, I compare 122 published and working papers along two perspectives and several sub-dimensions. In particular, I show that both, internal and external forces determine the rating process, thereby either leading to an increased or a decreased level of rating quality, and moreover, I derive various implications for further research.

Keywords: Credit ratings, rating agencies, credit risk

JEL Classification: G24