Asian Development Bank Institute. ADBI Working Paper Series

Transcription

1 ADB Worng ar Sr E mrgn of ang Agn: mlaon for E abl hng a gonal ang Agny n A a Yng Y Ta and -Gang u No. 4 Augu 00 Aan Dvlomn Ban nu

2 Yng Y Ta an aoa rofor Darmn of Ald Eonom Naonal Unvry of Kaohung TaChna. -Gang u had of Chna Eonom Global Mar ANZ ong Kong Chna Branh Th ar wa rvd afr havng nororad h ommn and uggon from aran a h Aan Dvlomn Ban nu (ADB Confrn on Crd ang Crd ang Agn and hr Dvlomn n Aa o b hld on July 009 a ADB Toyo. Th vw xrd n h ar ar h vw of h auhor and do no narly rfl h vw or ol of ADB h Aan Dvlomn Ban (ADB Board of Dror or h govrnmn hy rrn. ADB do no guaran h auray of h daa nludd n h ar and a no ronbly for any onqun of hr u. Trmnology ud may no narly b onn wh ADB offal rm. Th Worng ar r a onnuaon of h formrly namd Duon ar r; h numbrng of h ar onnud whou nrruon or hang. ADB worng ar rfl nal da on a o and ar od onln for duon. ADB nourag radr o o hr ommn on h man ag for ah worng ar (gvn n h aon blow. Som worng ar may dvlo no ohr form of ublaon. Suggd aon: Ta Y.Y. and.-g. u. 00. Emrgn of ang Agn: mlaon for Eablhng a gonal ang Agny n Aa. ADB Worng ar 4. Toyo: Aan Dvlomn Ban nu. Avalabl: h:// Auhor -mal: [email protected] [email protected] Aan Dvlomn Ban nu Kaumga Buldng 8F 3--5 Kaumga Chyoda-u Toyo Jaan Tl: Fax: U: E-mal: [email protected] 009 Aan Dvlomn Ban nu

3 ADB Worng ar 4 Ta and u Abra Th rn analy hd lgh on h ng u a rgonal rang agny n Aa n h wa of rn fnanal r. W nvga h oly fang a fnanal rgulaor whl valuang whhr or no o adm nw nran no h rd rang mar. n an noml onrang framwor w how ha an maral fnanal rgulaory body (rrnd by a bnvoln uranaonal organaon an fala rd rang of hgh qualy by allowng for h nry of nw rang agn on a non-ngl ba han do for a mr ngl nry. Th fndng aud by nrad omon among h rang agn whh ndu hghr qualy of rang rv vn hould rang agn ll xr blow hr maxmum lvl of ffor. JE Clafaon: D43; D8; G4; 5

4 ADB Worng ar 4 Ta and u Conn. nroduon.... raur vw Th Ba Modl Analy of Sngl rm Analy of Non-ngl rm Man ul Duon Th Eff of Moral aard Chang n Effor Co Conluon... 9 frn... Andx... 3

5 ADB Worng ar 4 Ta and u. NTODUCTON Crd rang and agn n h ndury hav bom an ngral ar of h global fnanal mar. Chang n rang nflun o r bond r and h rd rm n gnral. Maor global rd rang agn (GA nludng Fh n. Moody nvor Srv (Moody and Sandard and oor ang Srv (S& hav bom houhold nam and hr rang ror ofn draw anon from olan and bun ladr al. D GA bng vwd a mor rdbl han dom rang agn n mo ounr h onqun of hr rang aon n h global fnanal mar hav bn u undr lo ubl runy. Svral ndn n h rd rang mar hav ld o h dvlomn. Fr h olla of Enron Cororaon (Enron n h US ha rad onrn abou h onal "onfl of nr (Goln 00; Drh 007. Sond h AAA rang wr nrdbly agnd o omlx drvav rodu wh ll hgh qualy ollaral. Thrd maor global rang agn vn agnd nvmn-grad rang o oman u ror o hr banruy (SEC 003. nvabl ha raonabl doub ha bn a on h rdbly of maor rang agn and hr rol n ladng oward h rn global onom downurn ha bn hghlghd whl duon of h arora oly maur ha now bn xnvly dud (Bolon Frxa and Sharo 008 ndd a lor obrvaon of rn dvlomn n h global fnanal or wh an mha on h falur o warn nvor on h r of omlx fnanal rodu and on obl orora olla of maor mulnaonal frm naurally lad o h followng quon: Do h rd rang ndury dlvr on rom o nhan h mhanm amng for ound and ffv fnanal nrmdaon? ow an h dba ovr rang qualy b ronld whn only hr domnan rd rang rovdr load n h dvlod ounr aually ar o h hug dmand for rang rv n h rn of dvrgn onom and fnanal harar among rgon n h glob? ow do h o of ffor nvolvd n rang ha h ndury ruur of rd rang n h rn of moral haard? A a oward h undrandng o h quon h ar ud h ma on h qualy of rang whn a fnanal rgulaor hang admon oly oward h nry no rang mar of onal rang nran. By admon of h onal rang nran w man h nry of rang agn ha hav ounry- and/or rgonal-f nowldg abou bun ra n ran loal n onra o global agn whh ar nrumnal n drng h dvlomn of h ndury. n h lgh of nformaon aymmry w dvlo a ml noml onrang modl of nry rm uan wh moral haard. W nvag an nvronmn n whh a bnvoln rgulaor (whh an b a uranaonal organaon or om ardd organaon ovr h admon no h rd rang ndury. n h framwor onal nran would aly for an nry rm and ngoa ovr h nry f wh h organaon and h aymn of nry f would b olld for nvmn nfraruur mrovmn. W how non-ngl nry ndu grar omon bwn h rang agn whh n urn lad o hghr rang qualy han do ohrw vn f boh rang agn ll xr blow hr maxmum lvl of ffor. rha h horal ar mo rlad o h ar Mllon and Thaor (985 whh ondrd rd rang agn a a form of nformaon gahrng agn (GA and mhad h moran rol of nformaon aymmr and moral haard. owvr h ar dffr from hr n wo gnfan way. Fr unl Mllon and Thaor (985 w nvga whhr or no h organaon aay rrnd by h amoun of nry f drmnd hrough ngoaon n h rn of nformaon aymmry nhand du o a hang n h onng u of h mar of onally aabl rang agn. Ung ffor o a an ndaon of h lvl of nuonal barrr w xlor

6 ADB Worng ar 4 Ta and u h ondon undr whh a rgonal rang agny wh ounry-f xr would urvv h omon agan a global on n h rn of nformaon aymmry. Sond w ondr an ffor-ndung mhanm bul uon an noml onra bwn h bnvoln uranaonal organaon (nuonal rnal n h rn onx and rd rang agny n onra o h noy xrnal monorng n Mllon and Thaor. Th ar alo loly rlad o a rn onrbuon on rag lnng n h rn of moral haard (Shm 007. n onra o h aumon of ro rof du o Brrand omon w ondr hr a ng whr h rang agn qually har dndng uon hr ffor lvl h oal bnf gnrad from h rang mar a hr ffor dmonrad wll drmn whhr hy wll b uful n urng rang bun from onal ln. W rovd hr an analyal framwor ha gnral nough o aroxma raly and y ml nough o rovd raabl ngh. Th ar hrfor onrbu o h duon on whhr or no a rhang h rd rang ndury by allowng for nw nran fala h nhanmn n h qualy of rang among ohr moran oly u. Morovr h ar alo onrbu o h lraur n h ara of nuonal dvlomn for fnanal or rform and rgonal ngraon by xlorng h mlaon for obl algnmn of h fnanal landa n Aa a mov away from rlan uon maor agn oud h rgon. Th ar alo hl o dnfy boh oly hallng and oorun ha may mrg for furhr nhanmn of rgonal ngraon n Aa hrough buldng nuon n nrumnal fnanal rv ndury uh a h rd rang ndur. Th r of h ar organd a follow. Son rvw h rlvan lraur rlad o h ym govrnng h rd rang agn n h glob. Son 3 onan an analyal modl of rag rang agny admon wh moral haard n h rn of noml nformaon. Son 4 du h man fndng and Son 5 onlud.. TEATUE EVEW Thr a larg body of lraur boh horal and mral on rd rang and hr rol n nrnaonal fnanal mar. rvou rarh along h ln an b dvdd no hr branh: Th fr branh dud h qualy of rang and addr h quon of whhr or no h maurmn n h qualy of rang manngfully rfl wha hy ar uod o maur (man 958; Ang and al 975; and Kao and Wu 990. Th ond branh xamnd whhr or no rang ror qualavly onvy nformaon ha h mar ha no alrady nororad no r from ohr avalabl nformaon (Ka 974; Grr and Ka 976; ngram Broo and Coland 983; Wnn 977. For xaml and olhaun and fwh (99 found ha rang do onan nformaon byond wha ublly avalabl. Th hrd branh analyd how h rang agn u ubl nformaon n ng h qualy of rang (Kalan and Urw 979; Edrngon 985; on 99; Grundy 997; ndr 99. Darng from h horal onrn Blum m and Manlay (998: udd h rd rang mar and arbud h downward rnd n h qualy of rang n h Und Sa du n ar o hangng andard. Frr u and Sgl (999 nvgad h nformaonal valu mbddd n h ovrgn rang of rd rang agn. Thy found ha ovrgn rd rang wr ro-ylal for h Ea Aan rh onom durng h 997 fnanal r. Thrfor h auhor argu ha rd rang agn aar o hav aggravad h Ea Aan r by downgradng Ea Aan r ounr mor han h wornng n h ounr onom fundamnal would hav ufd. Anohr rand of rd rang lraur ung h analyal framwor of gam hory foud on h rol of nformaon nrmdar. For xaml ud by Morgan and Son (003 and Kar (008. Kar Oavan and Squnan (007 blong o h ln

7 ADB Worng ar 4 Ta and u of rarh by ung gnalng gam n whh a ndr fa a o of lyng. ndr and Oavan (008 xamnd h ma on nformaon rvlaon of rag onrang bwn h ndr and h rvr. Thy fou on a rnal roblm n rovdng nnv o a al agn o a o mulanouly ro for uomr and adv uomr on h rodu uably. Smlarly Bolon Frxa and Sharo (007 ondr rag onrang whn h ndr ar ng r for hr rodu whl rovdng uggon o h unnformd nvor. Wh rgard o h lraur on h mlaon of rang hong Faur-Grmaud yrah and Quada (006 nvgad orora govrnan rang n a mar wh ruh-llng rd rang agn and raonal nvor. Thy howd ha omon bwn rang agn an lad o l nformaon dlour. Farh rnr and Trol (008 ondrd ha nformaon nrmdar (uh a rang agn an rovd varou y of vrfabl nformaon and nvga h ma of mar ruur on h rang hong bhavor by h rad ny (hr frm or ndvdual. 3. TE BASC MODE Th u of h modl on of wo r-nural ar a rgulaor (rrnd by a bnvoln uranaonal organaon and a grou of rd rang agn. Th uranaonal organaon (rnal u rm o h rang agny (agn n aordan wh h andard govrnng h rovon of rang rv. Eah rang agny whr n onally aabl of rovdng rang rv whh allow ln (h ur o aqur aal (.g. u bond rovdd h rang agn oban a rm from h uranaonal organaon. An agny ha oban a rm dd ffor lvl n rovdng rang ror of hgh qualy whh n urn fala mar har n h rang ndury a long a h ur ufully aqur fundng from h aal mar. Dno by h ouom of whhr or no an ur aqur aal. f h ur do. f 0 do no. h oal numbr of rang agn who ln ufully aqur aal gvn h agn ffor. h of oal n bnf (rof of h rd rang mar. Th xd har of n bnf o ah agny gvn n n n by (. n h u an agny noy h monooly bnf ( > 0 f only on agny uful n rovdng h rv for urng h fundng nd. Ohrw h oal bnf qually l among h agn and ah agny oban an xd har whn hr ar ou of n agn ufully a h ur n aqurng h aal. An alrnav xlanaon of h urrn ng an b rovdd f w nrr agny a a loal rang agny nad of on of h global rang agn. ndd whn agny ado h gudln ou by h uranaonal organaon h oly u of nouragng h rd rang ndury bom vdn a h f hdul now rv a on form of h oly nrumn. W aum ha a rang agny ffor whh a hddn aon drmn whhr or no h ur an ufully ur rang bun from onal ln and ha h W ondr a an qulbrum ouom h xn of a uranaonal organaon ubqun o h rn falur of maor global rang agn n rdng orora olla. Naurally h u of moral haard n h analyal framwor of agny hory aur an moran a of obl onnu n rahng mullaral agrmn whn h onx of rgonal ooraon for h mrgn of nw loal rang agn. Whou h lo of gnraly w hav aumd ha ah rang agny rovd rv only o a ngl ln (h ur. Nonhl h ml hararaon an aly b xndd o a mor gnral uaon of mull ln. 3

8 ADB Worng ar 4 Ta and u ur an ud wh robably f h agn wor hard and wh robably 0 f h agn hr. 3 Dno by h agn duly of xrng ffor. ( All ar ar aumd o b r-nural and walh-onrand ( nn [990]. obvou ha a rang agny an only ay h rm f whn arn a ov bnf wh xd har... 4 W aum ha h rm f drmnd hrough h ngoaon bwn h uranaonal organaon and h rang agny. Th uranaonal organaon alon anno hghn omon n h rd rang mar by rrbng r for h rang rv ( Ka and Sharo [986]. Th ruur of h ngoaon ovr rm f a follow. Fr h uranaonal organaon announ a hdul of rm f whh h rang agn an a or r. f an agny r h f hdul oban no rm and hu n bnf ro. An agn who ha ad h f hdul and grand a rang rm hn dd whhr or no o xr ffor. Fnally h agn rof ar rald and aymn o h uranaonal organaon mad. n ordr o brng ou h mag n a ml mannr w hall ondr n h followng analy an nvronmn n whh hr ar wo rd rang agn and whr and ah fa an ffor o of. W aum for mly. Two naro ar ondrd. n naro all lmn of h modl ar aumd o b vrfabl.. hr ymmr nformaon. n naro h don of an agn whhr or no o xr ffor a hddn aon.. hr nformaon aymmry whh lad o moral haard. Th man uro of our analy o rovd ngh no h followng quon: Should h uranaonal organaon adm on agn nry no h rang mar or hould boh agn oban rm? n h lar a boh rd rang agn mgh b uful n hlng ra fund o ha omon a h rd rang mar would lad o mallr rof. 3. Analy of Sngl rm Aum fr ha h rnal organaon (or rnal u an xluv rm o on rang agny. rrn whhr ( or no ( 0 h agn xr ffor. 5 n naro h f hdul ( ; annound by h organaon ondonal uon and. Th agn budg onran ml ( ; mu hold. Clarly for any ffor lvl h agn wllng o ara f h xd rvnu mnu ffor o nonngav.. Π E[ ( ] 0. ( An nuv nrraon of Equaon ( lnng h rn analy o raal oly onrn an b rovdd a follow. f w nrr a h o of nry rflng h floor rqurmn ou by h rgulaor and a a f hdul aurng h al of aymn ad o h rgulaory agny hn Equaon ( ml h bnvoln uranaonal organaon an ndu h ffor of rd rang agny hrough dgn of 3 For mly w aum ha f boh agn oban rm whhr agn uful or no ndndn. of agn whr 4 No ha fxd f for mloyng h rd rang rv ar ondrd rgardl of h u of h ur n an ur alway ha o nur om o. [0] 5 Th qualav rul hold vn whn w ondr a onnuou lvl of ffor whr. 4

9 ADB Worng ar 4 Ta and u f hdul whl ang no aoun h agny rforman n falang a o aal for hr ln and hr ffor lvl. lar ha h agn a a f hdul of mlmn low ffor n (a [ ( 0] ( [0 ( ( 0. ( and ( 0; 0 whn (b ( ( (0 0.. ( ; / and ( ( a ( b ha [ ( 0] (. follow ha (a mu bnd and hu ( ; 0. And f h agn mlmn hgh ffor h araon onran ml (d ( ( (0.. / (; ; ( [ ( 0] ( [0 ( ( 0 ; and (f ( d ( ha [ ( 0] (. ay o vrfy ha (d mu bnd mlyng ha uan. ( ; / whh allow for (f o n h rn of nformaon aymmry (naro h f hdul ( no longr ondonal on. Th budg onran ugg ha (. For any ffor lvl mld by h f hdul h agn araon onran Π E[ ( ] 0 mu hold. vdn ha h agn offr ( f mlmn low ffor n (g [ (] ( [0 (0 0.. ( (h ( ( (0 0.. ( / and ( ( g ( h namly [ (] (. follow ha ondon (g mu bnd and w hav (. Furhrmor h agn nnv omably onran rad a E[ ( ] E[ ( 0] ` ( mu hold whh oghr wh budg onran ml araon. No ha Equaon ( an b alrnavly xrd a [ (] ( [0 (0] [ (] ( (0. raghforward o vrfy ha an agn a a f hdul of ( 0 0 and ( /(. 3. Analy of Non-ngl rm Now ondr ha h uranaonal organaon u rm o wo agn and. {0; } nda whhr or no h ln (h ur of agn 5

10 ADB Worng ar 4 Ta and u 6 ufully aqur h fundng nd and l } {0; nda whhr agn xr ffor. n naro dno by ; ( whr h f hdul offrd by h uranaonal organaon. Th budg onran of an agn ml ha ; ( (3 whr n n n ( Equaon (3 mu hold and for ffor lvl and h araon onran now rad a 0 ] ; ( ( Π E. Clarly f h agn hoo o mlmn low ffor hn h f hdul uh ha ( ; ( n ( [ ] [ ] [ ] { } 0 0; (0 0 ( 0 ; (0 0 ( 0 0; ( ( 0 ; ( ( [ ] [ ] [ ] { } 0; (0 0 ( ; (0 0 ( 0; ( ( ; ( and (l ( ( ha { } { } 0 ; (0 ( 0 0; ( ( 0 ; ( / ( grar han { } { } ; (0 ( 0; ( ( ; ( / (

11 ADB Worng ar 4 Ta and u Clarly Condon ( mu bnd and hu w hav ( ; ( Mor fally ( ; 0 / ; ( 0; 0 ; ( 0 ; 0 0 ; and ( 0 0; 0 0. Th rul nda ha h agn qually har h oal bnf n h rang mar hould hy boh ud. And f h agn xr honly hgh ffor would only a a f hdul of ( 0 ; 0 ( 0; ( 0; 0 and ( ( ; whr. 0 ( n naro dno h f from agn by ; o ha h budg onran mly ( ( and h araon onran ar Π E ( ( ] 0. (4 f agn mlmn low ffor hn a a f hdul of ( (. f h agn mlmn hgh ffor hn h nnv omably onran ml h f hdul uh ha ( 0 0 (; 0 and ( ( (; ( Andx. ( Bfor rnng h man fndng w hghlgh h ma on ffor o of noml nformaon a la affon and Marmor (00. mma blow ummar h rul oband n h rvou analy on h f hdul. mma For any [0] [ 0 ] and (0 h o of ffor undr oml nformaon and noml nformaon gvn by ϕ ( f ffor vrfabl f ffor hddn. Th roof rval and hn omd.. mma ugg ha h o of ffor o agn adud uward undr noml nformaon. 7

12 ADB Worng ar 4 Ta and u 3.3 Man ul W now ummar n rooon h f rvnu o h rnal undr oml nformaon and noml nformaon. rooon For any [0] 0 ] > 0 and ϕ ( [ f h rnal u rm o only on agn hr xd rof ar gvn by Π x ( f 0 ϕ( f. ; and f h rnal u rm o wo agn hn hr xd rof ar gvn by ( f 0 non Π x ( [ ] ϕ ( f 0. ( ϕ ( f. An moran mag mrgng from rooon ugg ha h agn an noy rn whn mlmn hgh ffor undr noml nformaon whl h rnal an alway xra h xd oal urlu undr oml nformaon. rooon blow harar h rnal omal rag of ung nry rm. rooon For any [0] 0 ] and ϕ ( (0 [ (a. f / hn h uranaonal organaon alway u rm o wo agn. Boh agn xr hgh ffor f ϕ ( < ( ( boh agn xr low ffor f ϕ ( > ( ( whl on agn xr low ffor and h ohr hgh ffor ohrw. (b f / hn only on agn oban rm. gh ffor xrd for anyϕ ( ( and low ffor ohrw. ( f < / < hn h uranaonal organaon u rm only o on agn and xr hgh ffor for any ϕ ( [ ( ] and boh agn oban rm and xr low ffor ohrw. roof Ung h rul onand n rooon omar h rnal ayoff undr h naro of non-ngl agn vdn h rnal u a rm o wo agn and boh xr hgh ffor whn ϕ ( < ( ( and boh xr low ffor whn ϕ ( > ( (. Morovr n h naro of ngl agn ubra h rnal ayoff undr low ffor from ha undr hgh ffor lar ha a ngl rm ud o h agn whh xr hgh ffor f ϕ ( > ( ( and low ffor ohrw. Fnally omar h rnal ayoff undr wo naro and ubra ayoff undr hgh ffor wh ngl agn and low ffor wh non-ngl agn follow ha h rm ud o only on agn and xr hgh ffor f ϕ ( [ ( ] and o wo agn and boh xr low ffor ohrw. 8

13 ADB Worng ar 4 Ta and u nrngly whn h ffor o ar uffnly larg n h nr of h rnal o u rm o wo agn vn hough boh xr low ffor whl h rnal u rm o a ngl agn and xr hgh ffor whn h ffor o uffnly low. Th rul an b nrrd wh rfrn o h andard a of (a and (b n rooon. nuvly n ordr o nra h robably ha h ur ufully aqur aal and hu h nformaon rn alway n h rnal nr o u rm o rovd ln o boh agn vn hough hgh ffor may ll lad o a rlavly mall u robably (a (a. n onra omal o u rm o on ngl agn vn hough low ffor an lad o a rlavly larg u robably (a (b. 4. DSCUSSON W now du h ff of moral haard h ff of hang n h ffor o on h rnal ragy of rm uan. 4. Th Eff of Moral aard A raghforward omaron of h ayoff o a bnvoln uranaonal organaon undr wo rgm of nformaon ruur llura h ff of moral haard. nruv o no ha for any < / < f [ ( ] < < [ ( ] hn h rnal u rm o wo agn n h rn of moral haard whl only a ngl agn oban rm undr ymmr nformaon. n hr ar uaon n whh mor rm ar ud du o moral haard. And w hav hu hown an nrng rul n onra o ho oband n h lraur. 4. Chang n Effor Co No ha for any < / < h rnal rm-ung ragy dnd uon h agn ffor o ( whr [ ( ] and [ ( ]. Dno by b ( a a bnhmar. nruv o b no h rul hold whn an nra n ffor o o from uh b ha (( 3 ( 4 whr 4 ( > ( 3 ( > ( and ( 4 > ( 3. n dndng on h onllaon of aramr and nd no alway b n h rnal nr o u nonngl rm o wo agn undr moral haard. 5. CONCUSON n h rn analy w hav udd h roblm of ngl vru non-ngl nry rm fang a bnvoln uranaonal organaon. W dvlod an analyal framwor of noml onrang n whh an agn ngoa wh h rnal on h f hdul for obanng a rm. W hav dmonrad ha hr ar ondon n whh n h rnal nr o u rm o non-ngl agn vn hough hy xr ffor blow hr maxmum lvl. W hav aumd ha h f hdul a barganng ouom bwn h rnal and h agn undr nformaon aymmry. 9

14 ADB Worng ar 4 Ta and u Th oly mlaon of h rul oband hr an rovd moran ngh no whhr or no h admon no rd rang mar of a nw nran agny an gnra grar bnf for nvmn nfraruur aay buldng. Th rul may b arularly uful whn ondrng for xaml h nry of a rgonal rd rang agny. n fa f w aroxma h rgonal rd rang agny xr on loal bun ra a h ndaon of h xn o whh h qualy of ror fala h a o aal of h ur hn h rn analy ugg ha a uranaonal organaon ould alway bnf from admng no h ndury of mor han on ngl rang agny n h rn of moral haard. Th fr rul rovd a ufaon for undrang oward nuonal ralgnmn n nororang no h ndury of rgonal rd rang agny. Furhr our fndng an alo onrbu ngh no h duon on whhr or no an nvor aymn rgm br han an ur aymn ym n ovromng h onfl of nr a rad by h r. Clarly h f hdul n h rn analy rrn a rforman-bad ouom of ngoaon bwn h uranaonal organaon and h rang agny. n h rn of noml nformaon f w nrr h rm f a an ndaon of h ffor lvl ha a uranaonal organaon nnd o ndu hn h f hdul rfl h xn o whh h rang agny xr ffor n dlvrng a qualy rang ror. Th ond rul offr an xlanaon for obl rformulaon n h aymn ym for h rang rv. Our analy alo hd lgh on rol of nuonal/rgulaory barrr n affng h ffor lvl of h omng rang agn. Ung ffor o a a roxy for h o of h rgulaory barrr w hav hown h ondon undr whh a rgonal rd rang agny urvv h omon agan a global on. Th hrd rul undrn h horal uor for h a of ng u rgonal rd rang nuon n Aa. moran o no ha h rn analy rovd h horal babon for oly rommndaon n romong raal ub mar uh a Aan Bond Mar nav n arular whn h noon of qulbrum agrd uon h rn falur of global rd rang agn n rdng orora olla. Alhough h rn modl ha no xlly nvgad h wlfar mlaon h ramn of uranaonal organaon ng u gudln n rm uan whh allow for h admon of rd rang agn n dffrn rgon uff o rv a roxy for h mlaon of wlfar n ah dn rgon. Nonhl h rn analy ha no bn abl o rovd oly rommndaon on u of rang hong and h ron of rd rang agn valuaon modl. W blv hr ar broad avnu for furhr rarh no h moran oly u for h dvlomn of rd rang ndury. 0

15 ADB Worng ar 4 Ta and u EFEENCES Ang J. and al K Bond rang mhod: Comaron and valdaon. Journal of Fnan 30 (: Br B. and T. Mlbourn uaon and omon: vdn from h rd rang ndury. arvard Bun Shool (BS Worng ar Boon MA: BS. Avalabl: h:// Bolon. X. Frxa and J. Sharo 007. Confl of nr nformaon rovon and omon n h fnanal rv ndury. Journal of Fnanal Eonom 85(: Bolon. X. Frxa and J. Sharo NBE Worng ar No. 47. Canor and F. ar Th rd rang ndury Journal of Fxd nom 5(3: 6. Drh F. Th rd rang ndury: omon and rgulaon. Avalabl a SSN: h://rn.om/abra998 Edrngon Clafaon modl and bond rang Th Fnanal vw 0(4: 376. Fahr E. rnr J. and J. Trol Far of ron?.nbe Worng ar Cambrdg MA: Naonal Burau of Eonom arh. Faur-Grmaud A. E. yrah and. Quada Th ownrh of rang. Avalabl: h:// Frr G..G. u and J. E. Sgl Th ro-ylal rol of rd rang agn: Evdn from h Ea Aan r. Eonom No 8(3: Goln J. 00. Th Ban Crd Analy andboo: A Gud for Analy Banr and nvor. Sngaor: John Wly & Son. Grr. and S. Ka Th dffrnal ff of bond rang hang on ndural and ubl uly bond by maury. Journal of Bun 49: Grundy B rfrrd and ax: Th rlav r of dvdnd and ouon Unvry of nnylvana Worng ar. hladlha A: Unvry of nnylvana. and J.. olhaun and. fwh. 99. Th ff of bond rang agny announmn on bond and o r. Journal of Fnan 47: ngram. Broo. and Coland Th nformaon onn of munal bond rang hang: A no. Journal of Fnan man W Corora bond qualy and nvor xrn. rnon NJ: rnon Unvry r. ndr. and M. Oavan Mllng hrough agn. Amran Eonom vw forhomng. nn. D md lably and nnv onrang wh x-an aon ho. Journal of Eonom Thory 5: Kao C. and C. Wu Two- maon of lnar modl wh ordnal unobrvd varabl: h a of orora bond. Journal of Bun & Eonom Sa 8:

16 ADB Worng ar 4 Ta and u Kalan. and G. Urw Saal modl of bond rang: A mhodologal nqury. Journal of Bun 5: 3 6. Ka S Th r adumn ro of bond o rang rlafaon: A of bond mar ffny. Journal of Fnan 9: Ka M.. and C. Sharo ow o ln nangbl rory. Quarrly Journal of Eonom 0(3: Kar N Srag ommunaon wh lyng o. vw of Eonom Sud forhomng. Kar N. M. Oavan and F. Squnan Crduly l and oly al. Journal of Eonom Thory 34: affon J.-J. and D. Marmor. 00. Th Thory of nnv: Th rnal-agn Modl. rnon NJ: rnon Unvry r. ua D. and J. on. 99. Chang n orora rd qualy Journal of Fxd nom : 7 4. Mah J. J. MAndrw and J.C. oh ang h rar. Journal of Monary Eonom 56(5: Mllon M.. and A.V. Thaor Moral haard and nformaon harng: a modl of fnanal nformaon gahrng agn. Journal of Fnan X: 403. Morgan J. and. C. Son An analy of o rommndaon. Th and Journal of Eonom 34(: arnoy F ow and why rd rang agn ar no l ohr gar. n Fnanal Gar: Can hy ro nvor? Edd by Y. Fuha and. E. an. Wahngon DC: Broong nuon r and h Nomura nu of Caal Mar arh. ndr K. 99. Dmyfyng h rang gam. Th San Frano Chronl 7 Fbruary. Shm. W Exluv v. non-xluv lnng rag and moral haard. Eonom r 97: Und Sa Sur and Exhang Common (SEC or on h ol and Funon of Crd ang Agn n h Oraon of h Sur Mar (a rqurd by Son 70(b of h Sarban-Oxly A of 00. Avalabl: h:// Summary or of u dnfd n h Common Saff Examnaon of Sl Crd ang Agn. Wahngon DC: SEC. Wh. 00. Th rd rang ndury: an ndural organaon analy. n ang ang Agn and h Global Fnanal Sym dd by.m. vh M. Govann and C. nhar. Boon MA: Kluwr Aadm ublhr.

17 ADB Worng ar 4 Ta and u 3 AENDX Undr naro f agn mlmn hgh ffor lvl ( gvn hr rval ffor lvl hr xd ayoff gvn by 0 ] ; ( ( E. Mor fally [ ] [ ] [ ] { } 0; (0 0 ( ; (0 ( 0; ( ( ; ( Tha 0; (0 ( ( ; (0 ( 0; ( ( ; ( ay o vrfy ha 0 ; 0 ( ( 0; ( 0 0; ( and ; ( whr 0. n naro dno h f from agn by ; ( o ha h budg onran mly ( ( and h araon onran ar 0 ] ( ( E. f agn mlmn low ffor vdn h f hdul gvn by ( (. f agn mlmn hgh ffor hn h nnv omably onran E E 0 ( ( ( ( mu hold whh alo nur araon. No ha h nnv omably an b wrn a

18 ADB Worng ar 4 Ta and u ( ( [ ( 0 ] [ / ( ] [ 0 (0 ] ( ( [ 0 (0 0 ] [ ( 0 ] [ / ( ] ( ( [ 0 (0 ] ( ( [ 0 (0 0 ] whh an b xrd a ( ( ( (; 0 (0; 0 ( / (; (0;. [ ] n h f hdul uh ha ( 0 0 (;. ( (; 0 ( and ( 4