Information sharing and rating manipulation

Mariassunta Giannetti*, José María Liberti, Jason Sturgess

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

We show that banks manipulate borrowers' credit ratings before sharing them with competing banks. Using a unique feature on the timing of information disclosure of a public credit registry, we disentangle the effect of manipulation from learning of credit ratings. We show that banks downgrade high-quality borrowers for which they have positive private information to protect their informational rents. Banks also upgrade low-quality borrowers with multiple lenders toavoid creditor runs. Our results suggest that credit ratings manipulation limits the positive effects of credit registries' information disclosure on credit allocation.

Original languageEnglish (US)
Pages (from-to)3269-3304
Number of pages36
JournalReview of Financial Studies
Volume30
Issue number9
DOIs
StatePublished - Sep 1 2017

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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