Foundations, Scope and Processes of Financial Rating: An Analysis of the Role of Rating Agencies in Financial Markets

Abstract

Financial rating currently occupies a central position in the functioning of financial markets as a mechanism for risk assessment and information dissemination. In this context, this article addresses the following research question: to what extent does financial rating constitute an instrument for risk evaluation and informational regulation in financial markets? The objective of the study is to analyze the conceptual foundations, institutional scope, and methodological process underlying the ratings assigned by credit rating agencies.

The study adopts a qualitative approach based on a critical and integrative review of the academic and institutional literature on credit rating agencies and their role within the contemporary financial architecture.

The findings show that financial ratings go beyond the simple assessment of credit risk and operate as a mechanism for the production and dissemination of financial information that contributes to reducing information asymmetries between issuers and investors. It also exerts an indirect disciplinary function on rated entities by influencing their financial strategies and governance practices. However, the analysis highlights several structural limitations, particularly the risks of conflicts of interest, the procyclical effects of rating changes, and the growing dependence of financial market participants on these external evaluations.

These results make it possible to theoretically reposition financial rating as a mechanism of governance and informational regulation within financial markets.

JEL Classification: G24, G32, G14, G28.

Paper type: Theoretical Research