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Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and non quantitative factors best predict bond defaults.Furthermore, some

Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and non quantitative factors best predict bond defaults.Furthermore, some of the raters invest time and money to meet privately with corporate personnel to get non public information that is used in assigning the issue's bond rating.In order to recoup those costs, some bond rating agencies have tied their ratings to the purchase of additional services.

Discussion Questions

Do you believe that this is an acceptable practice?Defend your position.

What is the impact of this practice on the capital markets?

What other means can rating agencies use to raise revenue to fund their operations?

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