סמינר במימון חשבונאות

Speaker: Zvika Afik , Ben Gurion University

Rating agencies play a central role in bond markets. However, the quality of credit ratings

is continuously debated. We suggest that the tightening of rating standards observed in prior

literature may be partially explained by rating accuracy improvement. We reconfirm that

corporate credit ratings have become more stringent over time. Firms with similar accounting

profile have a lower rating then they used to have previously. This paper sheds new light on

the evolving quality of credit ratings and their underlying trends. Our analysis shows that

ratings are now more correlated with market data than before and less correlated with

accounting data than before. Furthermore, we find evidence for improving credit rating

quality over time in terms of default prediction. We conclude that rating accuracy has

improved over time, and hence, some of prior studies’ critique on rating agencies seems

outdated.