Does competition affect truth telling? An experiment with rating agencies

Rabanal, J and Rud, O 2018, 'Does competition affect truth telling? An experiment with rating agencies', Review of Finance, vol. 22, no. 4, pp. 1581-1604.


Document type: Journal Article
Collection: Journal Articles

Title Does competition affect truth telling? An experiment with rating agencies
Author(s) Rabanal, J
Rud, O
Year 2018
Journal name Review of Finance
Volume number 22
Issue number 4
Start page 1581
End page 1604
Total pages 24
Publisher Oxford University Press
Abstract We use an experimental approach to study the effect of market structure on the incidence of misreporting by credit rating agencies. In the game, agencies receive a signal regarding the type of asset held by the seller and issue a report. The sellers then present the asset, with the report if one is solicited, to the buyer for purchase. We find that competition among rating agencies significantly reduces the likelihood of misreporting.
Subject Experimental Economics
Keyword(s) Conflicts of interest
Credit rating agencies
Laboratory experiment
Market structure
DOI - identifier 10.1093/rof/rfx012
Copyright notice © The Authors 2017. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved.
ISSN 1572-3097
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