A Thematic Analysis of Anticompetitive Behaviour in the Credit Rating Process of Structured Finance
type: CreativeWork
description: The credit rating industry is characterised by the high concentration of a small number of firms and, allegedly, this concentration stems from certain anticompetitive behaviours made manifest by the dominant firms in the industry. Therefore, as has yet to be done in empirical research, the purpose of this study is to carry out an exploration of the antitrust behaviours supposedly perpetuated by agents in the credit rating process for debt finance. The aim is to determine what influences, if any, the interactions and relationships in the rating process have on the sustenance of the oligopoly in the rating industry and on impeding new rating agencies trying to enter the market. Through the application of thematic analysis, this study aims to gather evidence on the behavioural motivations of rating analysts and underwriters in the rating process. Furthermore, the theoretical framework suggests notching and tying to be the anticompetitive behaviours that strengthen the oligopoly. Hence, the study finds that the drivers of anticompetitive notching in the rating process are the taking of haircuts and mapping, the guise of protecting investors’ interests, punitive ratings and a quid pro quo rating norm. Similarly, it finds that the enablers of anticompetitive tying are continuous dealing in the rating process, covert negotiation, repeat rating requests, ancillary services and the regulatory overdependence on credit ratings. In addition, this thesis explores the impediments of new rating agencies trying to enter the credit rating industry and finds that new rating agencies face peculiar market, regulatory and organisational barriers. Firstly, the market barriers comprise arbitrage, economic rents, investor preference and the issuer-pay model. Secondly, the regulatory barriers are discretionary regulation, new regulations and the designation of nationally recognised statistical rating organisation status. Lastly, the organisational barriers include down-trading, inadequate f…
abstract: The credit rating industry is characterised by the high concentration of a small number of firms and, allegedly, this concentration stems from certain anticompetitive behaviours made manifest by the dominant firms in the industry. Therefore, as has yet to be done in empirical research, the purpose of this study is to carry out an exploration of the antitrust behaviours supposedly perpetuated by agents in the credit rating process for debt finance. The aim is to determine what influences, if any, the interactions and relationships in the rating process have on the sustenance of the oligopoly in the rating industry and on impeding new rating agencies trying to enter the market. Through the application of thematic analysis, this study aims to gather evidence on the behavioural motivations of rating analysts and underwriters in the rating process. Furthermore, the theoretical framework suggests notching and tying to be the anticompetitive behaviours that strengthen the oligopoly. Hence, the study finds that the drivers of anticompetitive notching in the rating process are the taking of haircuts and mapping, the guise of protecting investors’ interests, punitive ratings and a quid pro quo rating norm. Similarly, it finds that the enablers of anticompetitive tying are continuous dealing in the rating process, covert negotiation, repeat rating requests, ancillary services and the regulatory overdependence on credit ratings. In addition, this thesis explores the impediments of new rating agencies trying to enter the credit rating industry and finds that new rating agencies face peculiar market, regulatory and organisational barriers. Firstly, the market barriers comprise arbitrage, economic rents, investor preference and the issuer-pay model. Secondly, the regulatory barriers are discretionary regulation, new regulations and the designation of nationally recognised statistical rating organisation status. Lastly, the organisational barriers include down-trading, inadequate f…
author: Onjewu, Adah-Kole
language: eng
keywords: Credit Rating Agencies, Competition, Anticompetitive Behaviour, Structured Finance, Oligopoly, Notching, Tying, Rating Process
date published: 2018-01-01T08:00:00Z
date modified: 2026-07-24T03:49:55Z
provider: University of Plymouth
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Plymouth