The Relevance of Multi-rating in the World Market

23 Pages Posted: 1 Aug 2005  

Gianluca Mattarocci

University of Rome Tor Vergata - Department of Management and Law

Date Written: May 2005

Abstract

The credit rating market is characterized by low competition and a potential conflict of interest, due to the system of remuneration of the rating services, which impairs the reliability of the judgement delivered. Multiple credit rating means further costs for companies, because of the fees paid to more than one rating agency, but it does bring significant benefits in terms of the dissemination, on the market, of judgements concerning the companies.

This paper examines the relationship between the number of rating announcements concerning a company and the performance of the securities issued by that company, besides the effects of discordant ratings assigned to a company by different rating agencies (so-called "split rating"), and presents a detailed study of multiple credit rating and of the advantages determined by the placement of issued securities at higher prices, in connection with the new ratings assigned by different agencies. An analysis of split-rating completes this overview of the issue, highlighting how the weight carried by the different rating agencies can affect market reactions.

Keywords: Multi-rating, split-rating, rating agencies

JEL Classification: G14, G29

Suggested Citation

Mattarocci, Gianluca, The Relevance of Multi-rating in the World Market (May 2005). Available at SSRN: https://ssrn.com/abstract=762724 or http://dx.doi.org/10.2139/ssrn.762724

Gianluca Mattarocci (Contact Author)

University of Rome Tor Vergata - Department of Management and Law ( email )

Via Columbia n.2
Roma, 00133
Italy
+390672595943 (Phone)
+39062040219 (Fax)

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