Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/23420
Authors: 
Güttler, André
Wahrenburg, Mark
Year of Publication: 
2005
Series/Report no.: 
Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting 155
Abstract: 
We provide insights into determinants of the rating level of 371 issuers which defaulted in the years 1999 to 2003, and into the leader-follower relationship between Moody?s and S&P. The evidence for the rating level suggests that Moody?s assigns lower ratings than S&P for all observed periods before the default event. Furthermore, we observe two-way Granger causality, which signifies information flow between the two rating agencies. Since lagged rating changes influence the magnitude of the agencies? own rating changes it would appear that the two rating agencies apply a policy of taking a severe downgrade through several mild downgrades. Further, our analysis of rating changes shows that issuers with headquarters in the US are less sharply downgraded than non-US issuers. For rating changes by Moody?s we also find that larger issuers seem to be downgraded less severely than smaller issuers.
Subjects: 
rating agencies
validation
leader- follower analysis
Granger causality
JEL: 
G23
G15
G33
Document Type: 
Working Paper

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