scholarly journals Credible or Biased?: An Analysis of Insurance Product Ratings in Germany

2020 ◽  
Vol 5 (No. 1 Apr 2020) ◽  
pp. 25-40
Author(s):  
Patricia Born ◽  
Stephanie Müller ◽  
Sharon Tennyson
Keyword(s):  
Financial Markets ◽  
Empirical Investigation ◽  
Disability Insurance ◽  
Consumer Awareness ◽  
Market Transparency ◽  
Rating Agencies ◽  
Insurance Product ◽  
Potential Sources ◽  
Product Ratings ◽  
Over Time

Instruments such as product ratings can help to overcome information asymmetries in retail financial markets. However, the capacity of ratings to promote market transparency and consumer awareness depends critically on whether they are credible. This article provides an empirical investigation of insurance product ratings in Germany, with an emphasis on the potential sources of bias that could undermine rating credibility. The analysis employs a panel dataset containing ratings for disability insurance products from two rating agencies over a 15-year period. Using the existing literature as a guide, we test a series of hypotheses regarding factors that may explain the variation in rating outcomes over time and across rating agencies. Our results suggest no major concerns regarding the credibility of insurance product ratings.

Uncertain Meanings of Risk

2018 ◽  
Author(s):  
Natalia Besedovsky
Keyword(s):  
Financial Markets ◽  
Credit Rating ◽  
Traditional Approach ◽  
Credit Ratings ◽  
Assessment Practices ◽  
Structured Finance ◽  
Rating Agencies ◽  
Measures Of Risk ◽  
Methodological Approaches ◽  
Ontological Uncertainty

This chapter studies calculative risk-assessment practices in credit rating agencies. It identifies two fundamentally different methodological approaches for producing ratings, which in turn shape the respective conceptions of credit risk. The traditional approach sees ‘risk’ as an only partially calculable and predictable set of hazards that should be avoided or minimized. This approach is particularly evident in the production of country credit ratings and gives rise to ordinal rankings of risk. By contrast, structured finance rating practices conceive of ‘risk’ as both fully calculable and controllable; they construct cardinal measures of risk by assuming that ontological uncertainty does not exist and that models can capture all possible events in a probabilistic manner. This assumption—that uncertainty can be turned into measurable risk—is a necessary precondition for structured finance securities and has become an influential imaginary in financial markets.

scholarly journals Discount, transparency and announcements effects of equity rights offerings: international evidence

2021 ◽  
Author(s):  
Nils-Christian Bobenhausen ◽  
Astrid Juliane Salzmann
Keyword(s):  
Financial Markets ◽  
Information Asymmetry ◽  
Capital Market ◽  
Announcement Effect ◽  
Announcement Effects ◽  
Market Transparency ◽  
International Evidence ◽  
Negative Effect ◽  
Rights Offering ◽  
High Information

AbstractEquity rights offerings and their respective announcement effects have been studied extensively in the literature. Our study expands upon these studies and focuses on those announcement effects and the relation between the discount of an equity rights offering and the announcement effect. Previous theoretical and empirical analyses show that firms can signal their quality via the discount in an equity rights offering and demonstrate a negative relation between the discount and the announcement effect. We argue that this link is only relevant in environments where signalling is possible and necessary. These are financial markets with a particularly low level of capital market transparency, i.e. high information asymmetry. We calculate announcement effects for an international sample of equity rights offerings and show that the negative effect of the discount on announcement effects can only be observed in environments with a low capital market transparency. Hence, our study estimates announcement effects across several different countries and is thus among the first to analyse signalling considerations for equity rights offerings in different transparency environments.

scholarly journals Moral Hazard and Claims Deterrence in Private Disability Insurance

2014 ◽  
Vol 6 (4) ◽  
pp. 110-141 ◽  
Author(s):  
David Autor ◽  
Mark Duggan ◽  
Jonathan Gruber
Keyword(s):  
Moral Hazard ◽  
Empirical Analysis ◽  
Time Variation ◽  
Rate Increase ◽  
Disability Insurance ◽  
Severe Disabilities ◽  
Replacement Rate ◽  
Waiting Period ◽  
Over Time

Exploiting within-firm, over-time variation in plan parameters for nearly 10,000 Long Term Disability (LTD) policies held by US employers, we present the first empirical analysis of the determinants of private LTD spells. We find that a shorter waiting period and a higher replacement rate increase the incidence of LTD spells. Sixty percent of the latter effect is due to the mechanical censoring of shorter spells, with the remainder due to the deterrence of spells that would have continued beyond the waiting period. Deterrence is driven primarily by a reduction in the incidence of shorter duration spells and less severe disabilities. (JEL D82, G22, J28, J32)

scholarly journals Three Letters that Move the Markets: Credit Ratings between Market Information and Legal Regulation

2017 ◽  
Author(s):  
Ulrich G. Schroeter
Keyword(s):  
Financial Markets ◽  
Applied Research ◽  
Credit Rating ◽  
Credit Ratings ◽  
Legal Regulation ◽  
Legal Regulations ◽  
Market Information ◽  
Market Reactions ◽  
Rating Agencies ◽  
Sovereign Credit Ratings

Journal of Applied Research in Accounting and Finance, Vol. 6, No. 1 (2011), pp. 14-30As demonstrated by the market reactions to downgrades of various sovereign credit ratings in 2011, the credit rating agencies occupy an important role in today’s globalized financial markets. This article provides an overview of the central characteristics of credit ratings and discusses risks arising from both their widespread use as market information and from the increasing references to credit ratings contained in laws, legal regulations and private contracts.

scholarly journals Bond Ratings And Their Determinants In A Changing Environment

2011 ◽  
Vol 9 (1) ◽  
pp. 132 ◽  
Author(s):  
Christina Ho ◽  
Ramesh P. Rao
Keyword(s):  
Changing Environment ◽  
Bond Ratings ◽  
Bond Rating ◽  
Rating Agencies ◽  
Stable Period ◽  
Over Time ◽  
Bond Rating Agencies

This study finds that bond rating agencies, to the extent that their behavior is captured in statistical rating models, tend to emphasize different variables over time and that this appears to be systematically related to the economic macro-environment. Specifically, the study finds that bond ratings are more sensitive to various measures of cashflow stability and solvency in an economically unstable period relative to a more stable period.

scholarly journals Monetary Policy Surprises over Time

2018 ◽  
Vol 08 (01) ◽  
pp. 1840002 ◽  
Author(s):  
Marcello Pericoli ◽  
Giovanni Veronese
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Euro Area ◽  
Yield Curve ◽  
Sovereign Spreads ◽  
Definition Of ◽  
Term Premia ◽  
The Impact ◽  
Over Time

We document how the impact of monetary surprises on euro-area and US financial markets has changed from 1999 to date. We use a definition of monetary policy surprises, which singles out movements in the long-end of the yield curve — rather than those changing nearby futures on the central bank reference rates. By focusing only on this component of monetary policy, our results are more comparable over time. We find a hump-shaped response of the yield curve to monetary policy surprises, both in the pre-crisis period and since 2013. During the crisis years, Fed path-surprises, largely through their effect on term premia, account for the impact on interest rates, which is found to be increasing in tenor. In the euro area, the path-surprises reflect the shifts in sovereign spreads, and have a large impact on the entire constellation of interest rates, exchange rates and equity markets.

A Review of Measurement Equivalence in Organizational Research: What's Old, What's New, What's Next?

2021 ◽  
pp. 109442812110565
Author(s):  
Ajay V. Somaraju ◽  
Christopher D. Nye ◽  
Jeffrey Olenick
Keyword(s):  
Review Paper ◽  
Measurement Equivalence ◽  
Future Directions ◽  
Organizational Research ◽  
Potential Sources ◽  
Organizational Constructs ◽  
Organizational Literature ◽  
Over Time ◽  
Made In ◽  
Highly Cited

The study of measurement equivalence has important implications for organizational research. Nonequivalence across groups or over time can affect the results of a study and the conclusions that are drawn from it. As a result, the review paper by Vandenberg & Lance (2000) has been highly cited and has played an important role in understanding the measurement of organizational constructs. However, that paper is now 20 years old, and a number of advances have been made in the application and interpretation of measurement equivalence (ME) since its publication. Therefore, the goal of the present paper is to provide an updated review of ME techniques that describes recent advances in testing for ME and proposes a taxonomy of potential sources of nonequivalence. Finally, we articulate recommendations for applying these newer methods and consider future directions for measurement equivalence research in the organizational literature.

Correction Mechanisms Shall Set Us Free

2018 ◽  
Keyword(s):  
Asset Pricing ◽  
Financial Markets ◽  
Systemic Risk ◽  
Credit Rating ◽  
Market Environment ◽  
Rating Agencies ◽  
Market Protection ◽  
Protection Mechanisms ◽  
Structural Mechanisms

Market protection mechanisms work well during calm periods, but some fail miserably during slowdowns, at just the time we need them to work. When the market environment turns inhospitable, the accelerators take over from the brakes. This article frames the issues concerning oversight mechanisms, which enabled the crisis, and structural mechanisms, which in many ways advanced it. We detail the potential for competition for clients to interfere with the objective judgment of three financial markets gatekeepers: the credit rating agencies, auditors, and asset pricing firms. Any perceived bias in the quality of gatekeeping services can undermine market confidence. We then explore regulatory and contractual shortcomings that, in the event of a downturn or crisis in confidence, can exacerbate a narrow complication. In addition to the classic lemons problems in the context of information asymmetries, the tight relationship between ratings and prices perpetuate any re-rating or repricing scenarios—they combine to create an overwhelming downward force. Serious action is required. If unattended, these shortcomings leave our economy needlessly exposed to the same crisis-era systemic risk concerns that present themselves when downturns can spiral, unrestrained, into meltdowns.

scholarly journals Disproportional Ownership Devices: Reviewing the Last 25 Years of Research

2016 ◽  
Vol 11 (4) ◽  
pp. 22 ◽  
Author(s):  
Sara Saggese ◽  
Fabrizia Sarto
Keyword(s):  
Financial Markets ◽  
Policy Making ◽  
Civil Law ◽  
The Other ◽  
Main Research ◽  
The One ◽  
Lock In ◽  
Practical Implications ◽  
Scholarly Attention ◽  
Over Time

<p>The paper aims to systematize the literature on disproportional ownership devices by reviewing and classifying 148 articles published in international academic journals over the last 25 years. The findings show that the scholarly attention on disproportional ownership devices has grown over time. Most papers adopt the agency framework and examine the mechanisms for leveraging voting power and to lock-in control, especially in civil law countries. Corporate governance journals prevail as leading outlets, despite the lack of publications specialized on the topic. Finally, the literature systematization highlights a research taxonomy based on outcomes and drivers of disproportional ownership devices. The article has both theoretical and practical implications. First, it develops a literature framework that systematically outlines the main research streams on the topic and identifies under-explored issues so as to guide future scholarly efforts. Second, it highlights the implications of disproportional ownership devices for company outcomes and reporting. Thereby, on the one hand, it supports managers in selecting the appropriate combination of these mechanisms so as to attract and retain investors. On the other hand, it emphasizes the importance of proper policy making interventions to improve transparency, openness and competitiveness of financial markets.</p>

scholarly journals Does American Stock Market React Differently to Expected Versus Surprise Ratings During Crisis Period? The Case of the 2008 Worldwide Financial Crisis

2018 ◽  
Vol 8 (3) ◽  
pp. 108
Author(s):  
Abdelkader Boudriga ◽  
Dorsaf Azouz Ghachem
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Market Reaction ◽  
Positive Impact ◽  
Good News ◽  
Crisis Period ◽  
Rating Agencies

We study the rating impact on American stock market during crisis period by distinguishing expected versus surprise announcements. If unexpected ratings generate stronger reaction than expected ones, which means that rating agencies maintain credibility and influence on investors’ decisions. Otherwise, they have to revise their methodologies and procedures in order to recover place on financial markets. Results show that during crisis period market reaction to bad and neutral expected rating announcements is negative and more accentuated than reaction to surprise announcements; on contrary to good news that produce a short positive impact when they are unexpected and are not perceived by the market otherwise. Results reflect once more market distrust to rating agencies and faith loss towards announcements.

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