Topic: Information Sharing and Rating Manipulation

Speaker: Mariassunta Giannetti, Professor of Finance, Stockholm School of Economics

Date: October 21st (Wed.)

Time: 2:00-3:30pm  

Location: Building 4, Room 101

Language: English

Abstract:

We show that banks manipulate the credit ratings of their borrowers before being compelled to share them with competing banks. Using a unique feature on the timing of information disclosure of the Argentinean public credit registry, we are able to disentangle the effect of manipulation from learning of credit ratings. In particular, we show that banks downgrade high quality borrowers on which they have positive private information to protect their informational rents. Banks also upgrade low quality borrowers to avoid creditor runs. Our results can explain the limited effectiveness of public credit registries and cast doubt on the use of credit ratings in reducing information asymmetry.

About the speaker:

Mariassunta Giannetti is Professor of Finance at Stockholm School of Economics. Professor Giannetti received a Master in Economics from Bocconi University in Italy, and a Ph.D. in Economics from University of California, Los Angeles. Prior to joining the Stockholm School of Economics, she was a research fellow of Center for Economic Policy Research (London, UK) since 2003. Also, she is the Director of European Finance Association (EFA). What’s more, she has served as associate editor for many editorial boards such as Review of Financial Studies and Financial Management. Her papers have appeared in Journal of Finance, Journal of Financial Intermediation, Journal of Financial Economics and other leading finance journals.