An Empirical Analysis of the effects of the Dodd-Frank Act on the Determinants and Informativeness of Credit Ratings

Abstract

We study the effects of the Dodd-Frank Act on the determinants and informativeness of credit ratings. We predict that the increase in regulatory oversight and litigation risk, as well as improved disclosure requirements motivated credit rating agencies (CRAs) to increase the weight on firm-specific, quantitative information on fundamentals in arriving at their ratings. We also examine whether the Act affects the accuracy of credit ratings in predicting future defaults. We find that the weight on fundamentals increases after Dodd-Frank and credit ratings better predict future default. Collectively, our evidence suggests that Dodd-Frank improved credit rating quality.

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Cite this paper

@inproceedings{Ahmed2017AnEA, title={An Empirical Analysis of the effects of the Dodd-Frank Act on the Determinants and Informativeness of Credit Ratings}, author={Anwer S. Ahmed and Dechun Wang and Nina Xu and Matt Ege and Brad Hepfer and Sean T. McGuire and A Mcmartin and Korok Ray and Lynn Rees and Sarah Rice and John S. Robinson and Nate Sharp and Senyo Y. Tse and Chris Yust}, year={2017} }