Work detail

Strategic Role of Credit Rating Agencies on Financial Markets

Author: Bc. Tomáš Matyska
Year: 2011 - summer
Leaders: doc. PhDr. Martin Gregor Ph.D.
Consultants:
Work type: Bachelors
Language: Czech
Pages: 66
Awards and prizes: B.A. with distinction from the Dean of the Faculty of Social Sciences for an extraordinarily good bachelors diploma thesis.
Link:
Abstract: The thesis deals with the role of credit rating agencies (CRAs) on financial
markets. While in years prior to the financial crisis credit ratings were
considered to be trustworthy as evaluations of investment risks, the crisis
has proved this premise wrong. The reason for the credit ratings failure –
whether it was due to inaccurate models and/or an intention – is therefore
crucial for setting up appropriate regulations. This thesis suggests that one
of the reasons was the conflict of interest arising from the CRAs business
model that was additionally enhanced by the use of credit ratings for regulatory
purposes, such as capital adequacy. Many investors thus had to choose
investments primarily on the credit rating basis, which created the incentives
for the CRAs to systematically overestimate the investments’ quality.
Downloadable: Bachelor Thesis of Matyska
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