Are Credit Rating Agencies useful?

The essay explores the critical role of credit rating agencies in assessing the creditworthiness of companies and securities. It highlights how these agencies, through opaque parameters, provide valuable insights that reduce information asymmetry in debt markets. By offering an alphabetical letter score, they deliver a forward-looking opinion on the creditworthiness of issuers, thereby enhancing transparency for investors. The work underscores the agencies' significance in facilitating informed investment decisions and their impact on the financial landscape.