Bank internal ratings of corporate clients are intended to quantify the expected likelihood of future borrower defaults. This paper develops a comprehensive framework for evaluating the quality of standard rating systems. We suggest a number of principles that ought to be met by 'good rating...

This study examines empirically whether corporate ratings by the credit rating agency Standard & Poor's reflect fundamental and publicly observable shocks to the credit quality of companies. This serves to assess the degree of information sensitivity of external ratings, and the timeliness of...