Multi-rating choice determinants: evidence from Fitch, Moody’s and Standard and Poor’s ratings

Rating agencies represent one of the main information providers for all the main financial markets whose value depends both on their reputation and on their degree of independence in respect to rated entities. The fee payment solution adopted by major rating agencies exposes them to a risk of collusion between rating and rated entity because the fee for their service is mainly paid by the evaluated entity. In order to ensure the accuracy of a rating agency evaluation, a firm could hire more than one rating agency. Studies published in relevant literature demonstrate that the market normally appreciates the availability of ratings evaluated by different agencies and the rated entity can so benefit from its expanded reputation in the market. This paper examines the customers of the main worldwide rating agencies (Fitch, Moody’s and S&P) during the period of time from 1999-2008. The results demonstrate that the multi-rating solution is frequently adopted by their customers and normally, the choice to hire more than one rating agency is affected by the type of rating requested, the variability of rating assigned and the number of new ratings that will be demanded.