An examination of rating agencies' actions around the investment-grade boundary
AbstractData on credit ratings by the agencies with the legal status of Nationally-Recognized Statistical Rating Organizations (NRSROs) show some tendency for one-day downgrades that start from the lowest investment grade, BBB-, to travel more grades than those from neighboring grades. This would be consistent with the lower threshold of the NRSROs' grade BBB- being at a substantial default probability, but also could occur simply because downgrades to junk severely impair some firms' operations. A comparison of data from a non-NRSRO agency and an NRSRO shows that the latter's regrades from BBB- moved in the direction of the non-NRSRO's earlier ratings. This suggests the non-NRSRO defines its grade BBB- more narrowly than the NRSRO.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 03-01.
Date of creation: 2003
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-05-08 (All new papers)
- NEP-FIN-2003-05-08 (Finance)
- NEP-RMG-2003-05-08 (Risk Management)
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"Market dynamics associated with credit ratings: a literature review,"
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Banque de France, issue 4, pages 53-76, June.
- Fernando Gonzalez & François Haas & Ronald Johannes & Mattias Persson & Liliana Toledo & Roberto Violi & Martin Wieland & Carmen Zins, 2004. "Market dynamics associated with credit ratings - a literature review," Occasional Paper Series 16, European Central Bank.
- Mattarocci, Gianluca, 2005. "Il rapporto tra impresa e agenzia di rating: la soluzione del multi-rating," MPRA Paper 4295, University Library of Munich, Germany, revised Mar 2005.
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