Disclosure in Markets for Ratings
American Economic Journal: Microeconomics
vol. 15,
no. 3, August 2023
(pp. 501-26)
Abstract
We study the implications of the disclosure regime of ratings on the level of information released to the public. Specifically, we compare mandatory and voluntary disclosure. We analyze a model where the potential issuers are initially endowed with homogeneous soft information about their values before paying to acquire ratings. We find that for every accuracy level of the issuers' initial information, voluntary disclosure results in a more informative equilibrium than mandatory disclosure. This finding identifies a dimension in which the existing European Union regulations that impose the mandatory disclosure of ratings may lead to a loss of information to the public.Citation
Weksler, Ran, and Boaz Zik. 2023. "Disclosure in Markets for Ratings." American Economic Journal: Microeconomics, 15 (3): 501-26. DOI: 10.1257/mic.20210214Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D42 Market Structure, Pricing, and Design: Monopoly
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
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