Does it matter who owns Moody’s?
|Speaker:||Simi Kedia, Rutgers University|
|Date:||Wednesday 18 March 2015|
Following its IPO in 2000, Moody’s had two shareholders, Berkshire Hathaway and Davis Selected Advisors, who collectively own about 23.5% of Moody’s from 2001 to 2010, the entire sample period. Moody’s ratings on corporate bonds issued by important investee firms of these two large shareholders were more favorable relative to S&P’s ratings.
The results cannot be explained by issuer characteristics or by greater informativeness of Moody's ratings. We estimate that a one notch increase in ratings by Moody’s, relative to S&P, is associated with annual interest cost savings of $0.4 ($0.6) million dollars for large (significant) investees of the Berkshire and Davis for an average bond issue. These findings are consistent with regulatory concerns about the public ownership of credit rating agencies.