This paper examines whether there is a natural barrier to entry in the credit rating industry. We consider an in nite horizon model in which each period, an original incumbent faces competition from an entrant randomly selected from a pool of ex ante identical potential entrants. The incumbent's...

Do rating announcements reduce information asymmetries? We investigate the effect of rating disclosures on the volatility and liquidity of the US bond market. Although rating agencies' decisions often are anticipated by credit spread changes, we show that in the case of no regulatory change...

We present an infinite horizon model that studies the competition between a relatively ineffective incumbent Credit Rating Agency (CRA) and a sequence of entrant CRAs that are potentially more effective but whose ability in appraising default risk is unproven at the time they enter the market....