Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76894
Authors: 
Löffler, Gunter
Year of Publication: 
2002
Series/Report no.: 
Working Paper Series: Finance & Accounting, Johann Wolfgang Goethe-Universität Frankfurt a. M. 97
Abstract: 
Rating agencies state that they take a rating action only when it is unlikely to be reversed shortly afterwards. Based on a formal representation of the rating process, I show that such a policy provides a good explanation for the empirical evidence: Rating changes occur relatively seldom, exhibit serial dependence, and lag changes in the issuers’ default risk. In terms of informational losses, avoiding rating reversals can be more harmful than monitoring credit quality only twice per year.
Subjects: 
conservatism
credit rating
rating agencies
rating migration
JEL: 
G2
G21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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