Implied Materiality and Material Disclosures of Credit Ratings

21 Pages Posted: 11 Apr 2015

See all articles by Robert G. Eccles

Robert G. Eccles

University of Oxford - Said Business School

Timothy Youmans

CECP Strategic Investor Initiative; High Meadows Institute; MIT Sloan Family Office Program

Date Written: April 9, 2015

Abstract

This first of three papers in our series on materiality in credit ratings will examine the materiality of credit ratings from an “implied materiality” and governance disclosure perspective. In the second paper, we will explore the materiality of environmental, social, and governance (ESG) factors in credit ratings’ methodologies and introduce the concept of “layered materiality.” In the third paper, we will evaluate current and potential credit rating agency (CRA) business models based on our analysis in the previous papers, and introduce the concept of “institutionalized materiality.” Starting with this paper, and in the rest of the series, we will also recommend how the credit rating model can be enhanced in the coming years to help build more sustainable credit markets.

This first paper is focused on the “G” (governance) component of ESG reporting. The governance matters we identify in this paper must be addressed before turning our attention to the broader set of ESG considerations in credit ratings. Failure to put these important governance matters at the top of the credit ratings reform agenda would, in our opinion, undermine the efforts we will recommend in our second and third papers.

Suggested Citation

Eccles, Robert G. and Youmans, Timothy, Implied Materiality and Material Disclosures of Credit Ratings (April 9, 2015). Harvard Business School General Management Unit Working Paper No. 15-079. Available at SSRN: https://ssrn.com/abstract=2592630 or http://dx.doi.org/10.2139/ssrn.2592630

Robert G. Eccles (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Timothy Youmans

CECP Strategic Investor Initiative ( email )

5 Hanover Square, Suite 2102
New York, NY 10004
United States

High Meadows Institute ( email )

129 Newbury Street
Suite 400
Boston, MA 02116
United States

MIT Sloan Family Office Program ( email )

77 Massachusetts Ave. E62-663
Cambridge, MA 02142
United States

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