Andreas Milidonis
University of Cyprus
Compensation Incentives of Credit Rating Agencies and Predictability of Changes in Bond Ratings and Financial Strength Ratings.
- We conduct lead-lag analysis of insurance bond ratings (BRs) and financial strength ratings (FSRs).
- Ratings by both investor-paid and issuer-paid rating agencies are used.
- We find a bi-directional relationship between issuer-paid BRs and issuer-paid FSRs.
- Investor-paid BRs predict issuer-paid FSRs.
- Predictability is associated with a 30-day, post-downgrade cumulative abnormal return of -4%.
- This article won the SCOR/EGRIE Best Paper Award (2012).