Studies have shown that when two information providers or outside auditors exist, the value provided by the second one will be decreased by the actions of the first. Capitalizing on the highly similar functions performed by banks and rating agencies, this paper examines the informational value of the credit ratings of bank loans. Further, it provides evidence on whether rating agencies duplicat...

This paper examines to what extent credit ratings directly affect capital structure decisions. The paper outlines discrete costs/benefits associated with firm credit rating level differences, and tests whether concerns for these costs/benefits directly affect debt and equity financing decisions. The tests find that firms near a rating upgrade or downgrade issue less debt relative to equity than...

By utilizing a large sample of US bond issuers with ratings from Moody's, S&P, and Fitch, this paper analyses whether observed differences in average rating levels between the third agency Fitch and the mandatory agencies Moody's and S&P are due to issuers seeking only an additional rating if it is expected to give a more favorable picture of credit quality. In contrast to previous research, we...

This report documents global corporate credit rating transition and default rates during the 1995-2003 period conditional on the full information in Moody's published credit opinions, which, in addition to the current credit rating, include prior rating actions and current rating outlooks and reviews. The primary findings of this study are: • Moody's rating system management practices attempt t...

7 Credit-spreads-based HJM Type Model 21 7.1 Single Credit Rating Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 7.2 Alternative Specifications of Recovery Payment . . . . . . . . . . . . . . . . . . . . . 29 7.3 Multiple Credit Ratings Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 7.4 Market Prices of Interest Rate and Credit Risk . . . . . . ...

Human judgment plays an important role in the rating of enterprise financial conditions. The recently developed fuzzy adaptive network (FAN), which can handle systems whose behaviour is influenced by human judgment, appears to be ideally suited for the modelling of this credit rating problem. In this paper, FAN is used to model the credit rating of small financial enterprises. To illustrate the...

n recent years, the demand for sovereign credit rat-ings—the risk assessments assigned by the credit rating agencies to the obligations of central govern-ments—has increased dramatically. More governments with greater default risk and more companies domiciled in riskier host countries are borrowing in international bond markets. Although foreign government officials generally cooperate with the...

Financial intermediaries, such as credit rating agencies, have an incentive to maintain a public reputation for credibility amongst investors. However, in a market where credit rating agencies are interacting repeatedly with only a few issuers (sellers), they also have an incentive to develop a second, private reputation for leniency. We develop a dynamic model that analyzes how credit rating a...