Abstract:

Credit rating agencies became important institutions in the global financial system by contributing to reduce asymmetric information about creditworthiness of companies and countries with their credit ratings. The effect of credit rating agencies has been increased in the global financial system together with globalization of financial markets. However crises such as Asian Crisis, Global Financial Crisis, Eurozone Debt Crisis and bankruptcies of companies such as Enron and Worldcom led credit ratings to be investigated. This study firstly dealt with historical development of credit rating agencies and credit rating approaches of major credit rating agencies and then examined the effects of credit rating agencies on Greece Debt Crisis. We find that credit rating agencies did not make credit rating accurately and on time in parallel with negative developments in Greek economy and they contributed to the deepening of sovereign debt crisis with their successive unmeasured downgrading outburst of debt crisis

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