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How do Rating Agencies Score in Predicting Firm Performance

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Author Info

  • Gunter Löffler
  • Peter N. Posch

Abstract

We use dynamic panel analysis to examine whether credit rating agencies achieve what they claim to achieve, namely, look into the future when assigning their ratings. We find that Moody's ratings help predict individual financial ratios over a horizon of up to five years. Ratings also predict a multivariate credit score, again over five years. The contribution of ratings appears to be economically significant and robust for different specifications.

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File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2007-043.pdf
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Bibliographic Info

Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2007-043.

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Length: 29 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2007-043

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Related research

Keywords: Credit Ratings; Predictive ability; Dynamic Panel Model.;

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Cited by:
  1. Volodymyr Perederiy, 2007. "Kombinierte Liquiditäts- und Solvenzkennzahlen und ein darauf basierendes Insolvenzprognosemodell für deutsche GmbHs," SFB 649 Discussion Papers SFB649DP2007-060, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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