The influence of credit rating agencies
After the financial crash in 2008 and more recent the debt crisis in Europe, rating agencies tend to become more influential. Ratings from Moody’s, Fitch & Standard and Poor’s are nearly daily headlines. It is interesting to assess what these ratings - which assess the risk of investing in a firm or country - really do. What is their real influence on capital accumulation? Do their ratings affect the cost of raising capital directly, or do they give the market a possible direction? In this research paper the influence of credit rating agencies on the cost of capital accumulation will be assessed.
What is the effect of credit rating agencies on the cost of capital accumulation?
Our paper will be organized in the following way:
1. Introduction - In the introduction we describe the degree of influence that credit rating agencies have in financial markets, hereby elaborating on the relevance of this research and structure of the paper.
2. Literature Review – This section will evaluate the role of credit rating agencies using economic theories described by prior made literature studies with regard to the behaviour and influence of credit rating agencies.
3. Conflicting views – In this part we analyse conflicting results found in the literature review and relate them to our expectations.
4. Conclusion and suggestions - Main results will be summed in order to answer the research question, hereby introducing suggestions for potential research in the future.
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