Reformation of the credit rating industry - Is there a need?
Principal-agentCredit ratingReformRegulation and corporate governanceManagement of enterprisesFöretagsledningManagementBusiness and Economics
The credit rating industry is a complex and fascinating industry. Its history stretches back more than 150 years and has gradually increased in importance. During its history the dynamics of the industry have changed. The extended-principal-agent model was developed by synthesizing different principal-agent-relationships into one model. This model provides a holistic understanding of the credit rating industry and illustrates the interdependence between the different relationships. The industry structure that currently reigns is anti competitive and there is an absence of accountability of the CRAs Based on the findings of the industrial analysis there is a need for reform. It must however be stated that the CRAs overall have succeeded in determining the credit risk of issuers. This argument does not however justify the preservation of the status quo. There is a need for reform and suggestions for reform are presented in the thesis.