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Ratings as Predictors of Default in the Long Term:an Empirical Investigation

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  • Koresh Galil

    (BGU)

Abstract

The quality of external credit ratings has scarcely been examined. The common thesis is that the rating firms’ need for reputation and competitiveness in the rating industry force rating agencies to provide ratings that are efficient with respect to the information available at the time of rating. In this paper I use survival analysis to test the quality of S&P corporate ratings in the years 1983-1993 with respect to prediction of default in the long term. I provide evidence that with this respect ratings could be improved by using publicly available information such as provision of collateral, leverage and size.

Suggested Citation

  • Koresh Galil, 2005. "Ratings as Predictors of Default in the Long Term:an Empirical Investigation," Working Papers 0505, Ben-Gurion University of the Negev, Department of Economics.
    • Handle: RePEc:bgu:wpaper:0505
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    More about this item

    Keywords

    Credit Risk; Credit Rating; Corporate Bonds; Survival Analysis;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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