داستان دو واسطه: بحث در مورد جانستون، مارکوف و رامناث (2009)، و چنگ و نئامتو (2009)

Cheng and Neamtiu examine whether credit rating agencies exploit market power to sell a substandard product. Their evidence is suggestive, but plausible alternative hypotheses could explain their results. Johnston, Markov and Ramnath provide first evidence on the bond and firm characteristics that determine the quantity of sell-side debt analyst coverage that a corporate bond receives. They also find that debt analysts anticipate credit rating changes and add information to markets incremental to credit ratings, suggesting debt analysts will be important to future research on bond markets. These results also suggest a method for refining tests of rating agency market power.

The papers under discussion address the functioning of different corporate bond market intermediaries. One paper examines sell-side debt analysts and the other credit rating agencies. While there is a voluminous literature on equity market intermediaries, the literature on bond market intermediaries is relatively small. Both papers thus provide much-needed insight into a $9.4 trillion market about which there has been too little academic research.1 The paper by Johnston et al. (2009) is the more novel of the two papers because it is the very first to study sell-side debt analysts. As such, it is mostly descriptive, providing information on what determines the amount of analyst coverage a given corporate bond issue receives. In addition, it demonstrates that debt analyst reports impact market prices, indicating that these intermediaries provide useful, value-relevant information to markets. Johnston et al. also provide some evidence that debt analysts are able to anticipate credit rating downgrades. Johnston et al.'s findings are significant because they identify a previously ignored intermediary that provides value-relevant information to credit markets. Their results provide insight into the role of this new intermediary, and how it overlaps with and contrasts with the role of rating agencies, as I discuss below in Section 2. They also show that there exists significant cross-sectional variation in debt analyst coverage. Hence the results of Johnston et al. indicate that debt analysts will likely prove useful for future research on price formation in the credit markets. Debt analysts will also likely provide a useful point of reference for comparison when studying other information intermediaries in credit markets, such as rating agencies, as I discuss in Section 4. Cheng and Neamtiu (2009) contribute to a literature that is less unexplored, on rating agencies, so their paper is more narrowly focused. They study how rating agencies changed their behavior after receiving heavy criticism in the financial press and regulatory threats from Congress during the early part of this decade. They claim to find that agencies unambiguously improved their product, increasing the timeliness and accuracy of corporate bond ratings without increasing rating volatility. The authors conclude that during the pre-threat period, rating agencies enjoyed excessive market power and used it to live the quiet life, putting out a substandard corporate bond rating product and underserving their customers. Their product improved only when they faced threats to this market power. As I discuss in Section 4, Cheng and Neamtiu's findings and conclusion are suspect. Plausible alternative hypotheses could explain the evidence the authors present to support their claim that rating agencies improved the quality of their corporate bond ratings. Furthermore, even if this product's quality actually improved, there are factors other than a threat to market power that might be responsible, which the authors fail to consider. Nevertheless, their results are highly suggestive and will likely spur future research into the question of rating agency market power. This issue is particularly timely and deserving of research as rating agencies are currently coming under intense fire for allegedly systematically underestimating the default risk of a different class of debt instrument, mortgage-backed securities (e.g., Davies, 2008). Regulators and policy makers would surely like to know whether rating agencies use their market power to live the quiet life, as other financial intermediaries with substantial market power have been known to do (e.g., Berger and Hannan, 1998). In Section 4, I outline how future researchers might use data on debt analysts to disentangle the market power hypothesis from plausible alternative explanations of Cheng and Neamtiu's results. The rest of this article is organized as follows. In Section 2, I discuss the two bond market intermediaries of interest and compare and contrast their roles in the bond market, and how the findings of Johnston et al. shed some light on these roles. In Section 3, I discuss the Johnston et al. paper in greater detail. In Section 4, I discuss Cheng and Neamtiu's paper in detail. In Section 5, I conclude by summarizing the most important and relevant insights the two papers provide and by giving suggestions for future research in the area of credit market information intermediaries.

Both Johnston et al. and Cheng and Neamtiu have laid the groundwork for future research into credit market information intermediaries. Johnston et al. provide insights into what determines the amount of debt analyst coverage a given bond issue receives, and they also show that debt analysts provide value-relevant information to markets. Debt analysts appear to anticipate credit rating changes, but at the same time provide additional information not contained in such ratings. Cheng and Neamtiu provide suggestive evidence that rating agencies have market power, which, when unchecked, leads them to live the quiet life and get away with selling a substandard product. Price formation in the corporate bond market is an under-researched topic. That bond analysts add relevant information to credit markets, coupled with substantial cross-sectional variation in bond analyst coverage, suggests that future researchers in this area need to pay attention to bond analysts. Johnston et al. should be highly cited in future research. Cheng and Neamtiu engage an important and timely topic, as credit rating agencies are currently under heavy criticism for allegedly helping to instigate the current financial crises. By identifying an event that threatened agencies’ market power, Cheng and Neamtiu have laid the groundwork for future investigations into the effects of this market power. It is, however, very difficult to draw definitive conclusions about causality from a single event that affects all economic actors under investigation. It is for this reason that Cheng and Neamtiu's results are only suggestive. Thanks to the work of Johnston et al., however, we now know of a second set of economic actors, namely sell-side debt analysts, whose role overlaps with that of rating agencies, and who were not affected by the same event in question. This suggests that future researchers may be able to more definitively assess the role of market power in agency behavior by examining how rating agency behavior, relative to that of debt analysts, responded to threats to agency market power.