NYU Urban Seminar: Andra Ghent on Competition and Credit Ratings After the Fall

News & Events | November 10th 2015

On October 20th the NYU Urban Seminar Series, co-hosted by the NYU Furman Center and Marron Institute, welcomed Dr. Andra Ghent, associate professor at Wisconsin University in Madison, who gave a presentation based on her paper, "Competition and Credit Ratings After the Fall," which analyzes the entry of new credit rating agencies into structured finance products.

Ghent takes an in-depth look at incumbent credit rating agencies—like Moody's and Fitch—and the effects of their damaged reputations following the 2008 economic recession. Did these damaged reputations creating an opportunity for new agencies to enter the market? The new agencies from the study that entered the market post-recession, Morningstar and Kroll, show consistently higher ratings for structured finance deals compared to ratings given by incumbent agencies. This strategy, known as "catering", has led to increases in market share for some but not all of the new rating agencies so it in unclear as to its efficacy. The strategy does lead to "shopping" as investors use the increase in rating agencies to seek the highest possible rating at the lowest cost.

The NYU Urban Seminar series is co-hosted by the NYU Furman Center and the Marron Institute. The speaker series is focused on research with implications for urban policy, and features a variety of researchers from across the U.S. discussing their work. View the full list of fall 2015 speakers. The NYU Urban Seminar is open to the public; registration is required.

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