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Informational efficiency of credit ratings

Author

Listed:
  • Nidhi Aggarwal

    (Indian Institute of Management, Udaipur)

  • Manish K. Singh

    (Indian Institute of Technology, Roorkee)

  • Susan Thomas

    (O. P. Jindal Business School and XKDR Forum)

Abstract

The timeliness of the credit rating of a firm has been frequently called into question over the previous two decades. This paper examines whether changes in credit ratings can be updated more frequently than at the frequency of updates in the accounting data. The paper finds that, when market equity prices of firms are readily available, changes in high frequency measures such as the Distance to Default, along with low frequency firm characteristics such as ownership structure and accounting data, can provide a more timely update on the probability of credit ratings downgrades.

Suggested Citation

  • Nidhi Aggarwal & Manish K. Singh & Susan Thomas, 2022. "Informational efficiency of credit ratings," Working Papers 14, xKDR.
  • Handle: RePEc:anf:wpaper:14
    as

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    File URL: https://papers.xkdr.org/papers/2022Aggarwaletal_changeindtdandratings.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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