Andreas Milidonis
University of Cyprus
An Empirical Analysis of Changes in the Relative Timeliness of Issuer‐Paid vs. Investor‐Paid Ratings.
- 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.