Abstract
The history of Credit Rating Agencies [CRAs], commonly called Rating Agencies, has a long and distinguished trajectory marked by influence, reputation and power. Due to the ability of this field to instigate significant changes in market regulations and actions of economic actors, this subject is extensively debated within the literature. In economic sociology, while some studies have focused on perceptions of performativity and market devices to understand how the calculability of its methods influences the economy, others, along relational lines of sociology, aim to understand them through a more complex constructive process. In this study, we attempt to fill a gap by exploring the complementarity between two theoretical approaches to sociology: theory of fields and performativity. Thus, we mobilize theory of fields to understand the inter-field relationship between the State and CRAs. Specifically, this paper sets out to i) analyze the co-constitution of the state and market fields with the field of CRAs; ii) describe the existing regulation and situate the CRAs and their classification devices in the broader history of the State and the market; iii) analyze how the legitimation of the CRAs by the State generates broader social contexts that assist in the performative work of the CRAs. Based on historical documentary research, we analyze some of the main milestones and regulatory events in the field of CRAs. This research reaffirms the assumption that even after credibility crises, the State is the most significant predictor of legitimacy, power, and influence that CRAs hold to date. The legitimacy of this power and influence has yet to be exhausted because the reputation of CRAs is rooted in the reputation of the State itself. This happens because the State provides essential actions (such as regulations) for the existence of the financial market. Thus, results suggest that the State, through regulatory measures, can engage several other fields to promote the legitimacy of performative work of the CRAs, whose purpose is to provide calculation tools to shape markets.
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Notes
The two agency models differ in terms of objectives and objects of classification. CR-A focus on publishing credit information reports, while CRAs focus on publishing credit risk rating reports (Sylla, 2002).
The Act "governs companies, such as mutual funds, which are primarily engaged in the investment, reinvestment, and trading of securities" (Committee on Governmental Affairs, 2002, p. 42).
Mr. Babson was president of United Business Service, a financial publisher, from 1924 to 1962 (NYT, original, 1972).
Moody's was sold in 1998 as a separate corporation by Dun and Bradstreet, the information company that had owned Moody's since 1962 (Sinclair, 2005, p. 27).
US stock trading ranged from 10 to 12 million shares, causing the NYSE to limit trading time, generating an operational crisis in the markets (Smith, 2010).
See more at: https://www.sec.gov/ocr/ocr-current-nrsros.html
"In 2000, the company's annual revenue reached $100 billion and was ranked as the seventh-largest company in the Fortune 500 and the sixth-largest energy company in the world. The company's stock price peaked at $90. However, the cracks began to appear when, in October 2001, Enron announced a loss of $618 million – its first quarterly loss in 4 years. Later in November, the company's stock price fell below $1.00. Investors lost billions of dollars" (Hemraj, 2015, p. 55).
Published in December 2010 by the Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) and revised in June 2011. See more at: https://www.bis.org/publ/bcbs189.pdf
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do Nascimento, R.R., Neto, M.S. Credit rating agencies and the state: an inter-field regulated relationship. Theor Soc (2024). https://doi.org/10.1007/s11186-024-09556-5
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DOI: https://doi.org/10.1007/s11186-024-09556-5