Francesca Toscano's article accepted for publication in corporate finance journal

Mike Ilitch School of Business Assistant Professor of Finance Francesca Toscano had a recent article accepted in Journal of Corporate Finance (JCF). JCF publishes high quality, original manuscripts that analyze issues related to corporate finance. The article, “Does the Dodd-Frank Act Reduce the Conflict of Interests of Credit Rating Agencies?” discusses the comparison between issuer-paid ratings and investor-paid ratings.


I compare issuer-paid ratings, represented by Standard & Poor’s (S&P) to investor-paid ratings, represented by Egan-Jones Ratings Company (EJR), after the passage of the Dodd-Frank Act. My results show that S&P ratings are lower than EJR ratings in the post-Dodd-Frank period, especially for …firms able to generate revenue to credit rating agencies (CRAs); i.e,…firms with a large bond issuance, larger firms, and low-performing fi…rms. Further, I …find evidence of a greater accuracy of S&P ratings relative to EJR ratings in the post-Act period as shown by the lower probability of large credit rating changes and rating reversals. Finally, I show that issuer-paid ratings are more concerned about providing timely ratings in the post-Dodd-Frank period, thus protecting their reputation as leading information providers, than investor-paid ratings. My results are robust to a wide battery of robustness tests.

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