Samenvatting:

Nuttige Stukken:

Although a number of other credit rating agencies with a narrower focus operate in the United States, DCR, Fitch, Moody's and S&P are the only agencies that rate US corporate obligations across a broad industry spectrum. For example, Thomson Bankwatch and IBCA (in the United States) exclusively rate financial institutions and A.M. Best provides ratings on insurance companies' claims-paying abilities. P3

The Securities and Exchange Commission (SEC) currently designates only Moody's, S&P, DCR, and Fitch as "nationally recognized statistical rating organizations" (NRSROs) for rating all US corporate bond issues; 5 the other regulators rely on the SEC's designations. P4

Many researchers have documented that third, or optional, agencies on average assign higher ratings than Moody's and S&P. Our results suggest that observed differences in average ratings reflect differences in rating scales. They also call into question financial industry regulations that assume equivalence of rating scales P22

We also explored why firms choose to obtain additional ratings. We found that firms are more likely to obtain a third rating if they are large and experienced issuers in the capital market. However, there is little evidence that third agencies are employed either to resolve ex ante uncertainty or to clear regulatory hurdles. While the rating scales of third agencies may be higher than others, there is little evidence that the decisions of issuers to use them are influenced by that factor P22

20-07-2009 om 01:13 geschreven door pieter

Samenvatting:

Nuttige Stukken:

This paper studies a repeated principal-agent problem in which a regulator approves credit rating agencies. While credit rating agencies can observe an issuer’s type, the regulator cannot. Credit rating agencies offer each issuer a rating and are paid by the issuers  who demand a rating. The regulator cannot observe whether a credit rating agency assigns correct ratings. The regulator can only observe the default rate within a rating category for each credit rating agency. The default rate within a rating category does not only depend on whether a credit rating agency assigns correct ratings. The default rate can also be influenced by a common shock. P1

The model shows that there exists an approval scheme which can induce credit rating agencies to offer correct ratings. The model suggests that a regulator should both deter a credit rating agency from unilaterally offering inflated ratings, and provide an incentive to deviate from a collusive agreement to offer inflated ratings. The model indicates that a regulator should both threaten to deny approval in future periods if a credit rating agency’s performance is worse than its competitors’, and reward a credit rating agency which deviates from a collusive agreement to offer inflated ratings by reducing the number of approved credit rating agencies in future periods. P5

20-07-2009 om 15:29 geschreven door pieter

Samenvatting:

...

Nuttige Stukken:

The paper asks if credit rating agencies have incentives to misrepresent their clients’

credit quality during an ongoing systemic crisis. Two important elements are essential for

a systemic crisis: (1) Investors are not able to distinguish fundamentally healthy debtors

from fundamentally unhealthy ones. (2) Investors tend to cumulatively withdraw their

funds. Therefore, neither fundamentally healthy nor unhealthy debtors can be expected to

survive a creditor’s exit. P1

Their goal is to overcome asymmetric information between

both market sides by evaluating financial claims according to standardized quality

categories P1

The agencies’ most important job is the evaluation of fixed income securities. P2

rating agencies emphasize that their evaluation is, after

all, their subjective opinion, which is not verifiable by courts4. Also, damages due

to obvious rating errors are not part of the rating contract and not currently

enforceable by litigation5. P2

ð      enkel reputatie staat in voor kwaliteit

P3 -> allerlei argumenten tegen rating agencies

Procyclical bias: Especially in the aftermath of the Southeast Asian crisis in

1997/1998, agencies were blamed for behaving procyclically, i.e. for simply following

the majority opinion of market participants13: According to many

observers, the agencies did not give any warning signals until after the turbulence

in the Asian markets had begun. However, when the crisis was actually

spreading, the agencies reacted by cumulatively downgrading issuers invested

in the Southeast-Asian markets without taking in account individual portfolio

quality14. P3

Voor de rest was deze paper te moeilijk!

20-07-2009 om 15:30 geschreven door pieter

Rating Shopping

20-07-2009 om 15:37 geschreven door pieter

Samenvatting:

Zowel de FASB als de IASB hebben de laatste jaren standaarden ingevoerd die er op wijzen dat men stelselmatig naar full fair value voor financial instruments wil streven. Intussen gaat dit al niet meer door, dixit de IASB!

Een van de onderzoeksresultaten is: Second, they need to consider more broadly how best to minimise measurement error in fair values so as to maximise their usefulness to investors and creditors as they make their investment decisions, and how best to ensure bank managers have incentives to select those.  Om minder measurement errorste hebben past de IASB sinds kort die level-hierarchy toe, maar die stond reeds in FASB exposure draft in 2005! Dus of het effectief zal zijn is maar de vraag natuurlijk... 

Market to market implementation issues 

Marking-to-market financial instruments are relatively easy if they are actively traded in liquid markets. The problem becomes more complicated if active markets do not exist, particularly if the financial instrument is a compound instrument comprising several embedded option-like features, values for which depend on inter-related default and price risk characteristics. Moreover, Barth and Landsman (1995) makes the observation that in the absence of active, liquid markets, fair value is not well defined in the sense that an instrument’s acquisition price, selling price, and value-in-use to the entity can differ from each other.13 Stated another way, even if an instrument’s acquisition or selling prices are observable, these prices can only, at best, provide upper or lower bounds on its “fair value”. The FASB’s stated preference for using an instrument’s selling price as its measure of fair value is appropriate when fair value is well defined, but is somewhat arbitrary when it is not.

Dus in 1995 is er reeds een paper verschenen die vragen stelt bij het gebruik van fair value in illiquide markten.

Voor de rest gaat de paper vooral over waarom men fair value al dan niet een goede maatstaf is om te meten. Dit is eigenlijk irrelevant voor de thesis, aangezien we fair value als een gegeven beschouwen. De dingen die hierboven staan kunnen wel interessant zijn. 

22-07-2009 om 12:06 geschreven door pieter

Gray, S. J. (1980), "The impact of International Accounting Differences from a Security-Analysis
Perspective: Some European Evidence", Journal of Accounting Research, Vol. 18, 1, pp.
64-76. 

We kunnen deze formule misschien toepassen op het verschil tussen IFRS en onderliggend resultaat bij banken, vanaf 2006 bekeken. Wel met de bedenking dat de formule voorzien is voor een hele lijst van ondernemingen binnen een land (niet alleen de banksector). Maar het kan interessant zijn aangezien een groot deel van de verliezen van KBC (en waarschijnlijk ook Dexia) te wijten zal zijn aan IFRS voor financial instruments.

Ook zeker nog te lezen:

Jermakowicz, E. (2004), "Effects of Adoption of International Financial Reporting Standards in
Belgium: The Evidence from BEL-20 Companies", Accounting in Europe, Vol. 1,
September, pp. 51-70.
Jones, T. and R. Luther (2005),

22-07-2009 om 17:56 geschreven door pieter