Do Credit Rating Announcements Have Informational Value ...

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According to Dittrich (2007), th e development of the rating industry can be roughly divided into
three stages. First stage lasted from the birth of the industry in 1909 till the 1930s. This was a
stage of fast growth. In 1940s through 1960s weak demand, few defaults and healthy economy
meant tougher times for rating agencies. Another phase of fast growth started in the 70s and has
lasted until today.
2.3 Credit rating industry today
As stated earlier, the number of rating agencies has remained small over the years. The nature of
the industry has been and is oligopolistic. One big factor in this has always been government
regulation which has made entry to the market very difficult. However, another important reason
is with no doubt the fact that the business relies so heavily on trust and reputation. There is no
better way to assure investors and other parties of the quality of ratings than a good track record.
This would make it very difficult for new entrants to gain a foothold in the markets where the
biggest companies have been present for about a century even if the regulation was not so tight.
The field of credit ratings has also seen many mergers and acquisitions which, in addition to the
two reasons mentioned above, has also played a role in keeping the number of agencies low.
Even though there are more NRSROs today, SEC recognizes ten as of 2010, the market is
dominated by three major companies, S&P, Moody´s and Fitch, the three original NRSROs. The
combined market share of two biggest, S&P and Moody´s, is 80%. When we add Fitch to the group
the combined market share is 95%. One could say the nature of the industry is even duopolistic
despite the fact that Fitch is counted as one of the three major agencies. S&P and Moody´s have
been big players and dominated the industry for a long time whereas Fitch has only been gaining
substantial prominence in the last decade.
Despite the grown number of NRSROs, the three major companies remain the only global players
that have not specialized in any particular products. The rest are small players that have
specialized either geographically or on a certain product category. The following table will list all
companies and their business focus.