Doctoral Dissertation Resaerch: The Legal Incorporation of Private Regulation: Transforming Ratings in Finance and Healthcare

University Of Virginia Main Campus, Charlottesville VA

Investigators

Abstract

SES- 1603041 Elizabeth Gorman Joris Gjata University of Virginia Ratings have become a symbol of the power of information to regulate lives. They are condensed ways of presenting information about people, organizations, or their products and activities. They take different forms and come from different sources. However, only some of these ratings have gained tremendous regulatory power over the lives of individuals and organizations as they evaluate compliance with certain standards of behavior. Most scholars and analysts regard ratings? regulatory power an inevitable, natural and functional response to conditions of increasing market expansion and uncertainty. This project examines the evolution of ratings and their sources for two large sectors - finance and healthcare - in the United States. In both fields ratings with regulatory power come from a few specialized private agencies. The recognition by law of those few specialized private agencies - credit rating and hospital accrediting agencies respectively - as legitimate sources of information to evaluate organizations? worth, is a key moment in the history of ratings for both fields. How and why were specific private agencies recognized as legitimate sources of ratings instead of alternative governmental or professional forms of regulation? How did ratings gain their regulatory power over healthcare and financial organizations? What was the role of the state and law in the emergence of ratings as a new institution? How did their meaning change over time? The answers to these questions will highlight institutional configurations without neglecting the agents that make possible their maintenance, change and stability. They also contribute to the demystification of new regulatory forms as inevitable, natural and functional outcomes necessitated by conditions of uncertainty and increasing market expansion. The comparison of two different fields helps reveal the interdependences of different fields and the crucial role policy makers play in shaping new forms of regulation: legitimizing them, contributing to their implementation, and mediating their power to shape social life. This project will combine data on congressional records and hearings about the formal recognition in federal legislation of certain specialized private agencies as legitimate sources of ratings, organizational histories and accounts, examinations of field specific publications, and newspaper data to trace the processes through which regulation-by-information emerged as a new institutional form in two major fields of activity in the US. It uses theories of institutional emergence to examine the political and cultural struggles surrounding the emergence of ratings by certain specialized private agencies as regulation-by-information and the sidelining of alternative sources of ratings like associations or government agencies. The project aims to clarify the meaning of ratings, the conditions under which they constitute ?regulation-by-information,? and present a more coherent framework for examining other emerging forms of regulation.