Write 2 page essay on the topic Credit Assessment and Consulting in Rating Agencies.
nsulting services whereby debt issuers request rating agencies to direct them on the manner to structure their debt issues with the aim of securing a favorable rating (Crockett, Harris, Mishkin & White, 2004). In such circumstances, the credit-rating agencies are in effect auditing their own work. Moreover, credit-rating agencies may deliver favorable ratings so as acquire extra clients for the ancillary consulting business.
Much of the challenges associated with Credit Assessment and Consulting in Rating Agencies relate to the reliability and integrity of ratings. Investors utilize credit ratings that mirror the probability of default to ascertain the creditworthiness of certain debt securities (Langohr & Langohr, 2008). Conflict of interest can yield a decrease in the flow of reliable information centering on either concealment of the information, or dissemination of misleading information (Brooks & Dunn, 2010). This has dire consequences on the value of stakeholder’s benefits.