Institutionalizing the Credit Rating Agencies in Iran

Abstract

Purpose: The purpose of this article was to develop a framework for the institutionalization of credit rating agencies in Iran, considering the institutional components and the socio-economic conditions of the country. Methodology: The research method was qualitative-analytical based on interpretative paradigm and Grounded Theory strategy. A combination of desk research and interviews was used to collect data; besides, judgmental and snowball methods were applied to select the statistical sample. Using open, axial, and selective coding, data were summarized in the categories of causal, contextual, intervening, interactive, strategic, and outcomes, all of which formed the main model of the research. Findings: Based on the research data, the most important components of institutionalization depend, firstly on institution-oriented culture which includes independence and objectivity, professionalism, and close supervision, and secondly, on gaining legitimacy which includes trust-building, expertise, stability, and continuity. Conflict of interests is one of the most noticeable challenges for institutionalization, the solution of which should be sought in close supervision and self-monitoring approach of rating agencies. Originality: By integrating institutional and organizational theories, a model has been presented for the institutionalization of credit rating agencies, which can affect the efficiency and effectiveness of these agencies as well as capital markets Implications: It is suggested that the supervisory bodies not only set high-level standards in the field of professional conduct and the instances of conflict of interests, but also encourage the culture of self-monitoring in credit rating agencies.

Keywords

• credit rating
• information asymmetry
• conflict of interests
• institutionalization
• qualitative analysis
• transaction cost.