The impact of financial ratings on bank governance: A theoretical literature review

Abstract

During the subprime crisis, rating agencies, once considered essential to financial transparency, were the subject of much criticism and scrutiny of their methods, along with other financial standards. In the banking sector, governance is strongly influenced by regulatory frameworks such as the Basel Committee's agreements on banking supervision (Basel II and, above all, Basel III), with a particular focus on risk management and compliance. This compliance-focused governance coexists with performance objectives, relying on both internal mechanisms (boards of directors, incentive mechanisms, etc.) and external controls (regulation, supervision, etc.) to guide and control management.

 Financial rating plays a central role in the financial system by assessing the creditworthiness of issuers. Carried out by agencies such as Standard & Poor's, Moody's, and Fitch Ratings, this process contributes to informed investment decisions and financial stability.

 Our scientific article offers a review of the theoretical literature analyzing the interactions between financial rating and bank governance. Drawing on contributions from information efficiency theory and neo-institutional theory,the study aims to understand how financial ratings can influence and reflect governance practices in the banking sector.