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Did Credit Rating Agencies do good work? - Research Paper Example
Finance & Accounting
Pages 14 (3514 words)
Credibility of Credit Rating Agencies Name of the Student: Name of the University: Date: Abstract This research paper includes an in depth study of various inter related topics which gives a good understanding of the globally connected financial industry. It explains various aspects of the financial industry and their resulting consequences…
This part of the study suggested why the credibility of credit rating agencies came into the scrutiny. Following that, a detailed study was done regarding the agency costs and its effects on the value of a company. It was seen that, agency cost mostly arises due to the principal agent problem. The principal agent problem is nothing but the situation that is characterized by a conflict of interest between the principal and the agent who are the managers and the shareholder respectively. This conflict of interests leads to agency costs and thereby decreases the value of a firm. Thereafter, the information asymmetry and its implications on the financial services industry have been explained. It has been seen that this factor has led to severe economic downturns in the recent times. One such example was the 2007-08 financial crises where huge extent of information asymmetry existed between the financial institutions and their potential investors which acted as a catalyst triggering the financial crisis. The following sections explained the reason for the credit crunch and its implications in the economy of Qatar. It was reported that Qatar was expected to be resilient to the global financial crisis. Thereafter a final conclusion has been provided. ...
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