Credit Ratings, Private Information, and Bank Monitoring Ability

37 Pages Posted: 21 Jun 2016  

Leonard I. Nakamura

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Kasper Roszbach

Sveriges Riksbank (Bank of Sweden); University of Groningen,

Date Written: 2016-06-16

Abstract

In this paper, we use credit rating data from two large Swedish banks to elicit evidence on banks' loan monitoring ability. For these banks, our tests reveal that banks' internal credit ratings indeed include valuable private information from monitoring, as theory suggests. Banks' private information increases with the size of loans.

Keywords: Monitoring, Banks, Credit Bureau, Private Information, Public Information, Ratings, Regulation, Supervision, Overconfidence

JEL Classification: D82, G18, G21, G24, G32, G33

Suggested Citation

Nakamura, Leonard I. and Roszbach, Kasper, Credit Ratings, Private Information, and Bank Monitoring Ability (2016-06-16). FRB of Philadelphia Working Paper No. 16-14. Available at SSRN: https://ssrn.com/abstract=2798538

Leonard I. Nakamura (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-3804 (Phone)
215-574-4364 (Fax)

Kasper F. Roszbach

Sveriges Riksbank (Bank of Sweden) ( email )

Financial stability department
Stockholm, SE 103 37
Sweden
+46 8 787 0823 (Phone)

HOME PAGE: http://www.riksbank.se/research/roszbach

University of Groningen, ( email )

Department of Economics, Econometrics and Finance
Nettelbosje 2
Groningen, NL 9747 AE
Netherlands

HOME PAGE: http://www.rug.nl/staff/k.f.roszbach/

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