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The Death of Corporate Reputation: How Integrity Has Been Destroyed on Wall Street by Jonathan R. Macey

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8. The New, Post-Reputation Wall Street: Credit Rating Agencies

Credit ratings are designed to help investors determine how risky a company is by measuring the likelihood that a company would be able to repay its rated debt in a timely manner. Credit rating agencies were, like accounting firms, once reputational intermediaries. However, the credit rating agencies have lost their reputations for independence, objectivity, honesty, and even competence. Credit ratings, given by only three major worldwide firms, no longer contain useful information. However, they still affect securities prices and borrowing costs for companies. Changes in ratings can themselves cause changes in borrowing costs that they are supposed to predict through a series of ...

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