The current standardized approach for assessing credit risk under Basel III depends on ratings assigned by credit rating agencies (CRAs). However, this approach presents three problems. First, the definitions of ratings used by CRAs to assess the likelihood of default and recovery rates are not...

We examine whether short sellers identify firms that have significant changes in default likelihoods and credit rating downgrades. In the month before a rating downgrade, equity short interest is 40% higher than one year prior. Short sellers predict changes in default probabilities that lead to...

This paper studies the impact of credit rating agency (CRA) announcements on the value of the Euro and the yields of French, Italian, German and Spanish long-term sovereign bonds during the culmination of the Eurozone debt crisis in 2011-2012. The employed GARCH models show that CRA downgrade...

We examine the relative impact of Moody's and S&P ratings on bond yields and find that at issuance, yields on split rated bonds with superior Moody's ratings are about 8 basis points lower than yields on split rated bonds with superior S&P ratings. This suggests that investors differentiate...

In this paper I examine the relationship between credit rating and insider trading of 301 firms from 2000-2006 for S&P 500 Index firms. I argue that changes to the firm credit rating may increase (decrease) informed trading activities. This investigation is essential since insiders with private...

This paper examines how the incumbent issuer-pay credit rating agencies (CRAs) in China adjust their rating strategies as a response to the entry of an independent rating agency, China Bond Rating (CBR), which utilizes a combination of public utility and investor-pay business model. We find that...

We assess the information content of three credit ratings for tranches of newly issued European residential mortgage-backed securities. We find that tranches rated by three credit rating agencies where the rating by Standard & Poor's (S&P's) Ratings Service or Fitch is inferior to Moody's lead...

This paper studies the impact of credit rating agency (CRA) announcements on the value of the Euro and the yields of French, Italian, German and Spanish long-term sovereign bonds during the culmination of the Eurozone debt crisis in 2011-2012. The employed GARCH models show that CRA downgrade...

As supply chain channels physical, financial, and information flows as well as associated risks, a firm’s supply chain information should be helpful in understanding and predicting its credit risks. Credit ratings as an approximate but important measure of corporate credit risks have been...

Using the Credit Rating Agency Reform Act of 2006, we examine the credibility of mandatory disclosure by credit rating agencies (CRAs) on managerial learning from stock prices. We find an increase in investment-price sensitivity for firms affected by the Act. Consistent with managers relying...