Estimating Unobserved Soft Adjustment in Credit Rating Models: Before and after the Dodd–Frank Act
研究信用评级机构在初步评级中使用的未公开软调整，量化其大小，并发现多德-弗兰克法案后软调整显著减少，对理解评级偏差和监管效果有帮助。
Abstract Credit Rating Agencies (CRAs) adjust preliminary bond ratings with knowledge beyond publicly available information. These unobserved “soft adjustments” may reflect material nonpublic information and rating biases due to conflicts of interest, making certain bond characteristics endogenous. We model and quantify soft adjustments as bond-specific thresholds in a semiparametric ordered-response model and exploit ownership structures of bond-issuers to control for endogeneity. Relying on the shift restrictions, we develop a location estimator for models of ordered choices with correlated heterogenous thresholds. Using Moody’s initial ratings from 2000 to 2016, we find a significant reduction of soft adjustment after the Dodd–Frank reform.