Market Discipline through Credit Ratings and Too‐Big‐to‐Fail in Banking

نویسندگان

چکیده

Do credit ratings help enforce market discipline on banks? Analyzing a uniquely comprehensive data set consisting of 1,081 rating change announcements for 154 international financial institutions between January 2004 and December 2015, we find that downgrades internal reasons, such as adverse changes in the operating performance or capital structure banks, are associated with significant default swap spread widening. However, this widening only occurs banks not perceived to be Too-Big-to-Fail (TBTF). Our findings question reliability tool TBTF suggest regulatory monitoring should remain main mechanism disciplining these banks.

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ژورنال

عنوان ژورنال: Journal of Money, Credit and Banking

سال: 2021

ISSN: ['1538-4616', '0022-2879']

DOI: https://doi.org/10.1111/jmcb.12789