University of Cyprus
News (Cyprus public policy)
Copyright text here
Compensation Incentives of Credit Rating Agencies and Predictability of Changes in Bond Ratings and Financial Strength Ratings.
Journal of Banking & Finance, Volume 37 (9), 3716–3732.
Publication year: 2013
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).