University of Cyprus
Copyright text here
An Empirical Analysis of Changes in the Relative Timeliness of Issuer‐Paid vs. Investor‐Paid Ratings.
Berwart, Erik, Massimo Guidolin, and Andreas Milidonis.
Journal of Corporate Finance, forthcoming.
Publication year: 2017
We conduct lead-lag analysis of issuer-paid vs. investor-paid changes in corporate bond ratings (1997-2007), after the tighter rating agency regulations (2002-2006).
This is first study to study both changes in ratings and changes in outlooks from the leading rating agencies.
First, we find a bi-directional lead-lag effect between investor-paid and issuer-paid agencies after 2002.
Second, issuer‐paid agencies behave less conservatively with outlook changes than rating changes.
Third, stock market reactions are larger to investor‐paid than issuer-paid downgrades implying that investor‐paid rating actions carry superior information.