Comunicação em evento científico
Is There a Self-fulfilling Prophecy in Credit Rating Announcements?
Paulo Viegas de Carvalho (Carvalho, P.); Paul Anthony Laux (Laux, P.); Joâo Pedro Pereira (Pereira, J.);
Título Evento
2014 FMA Annual Meeting
Ano (publicação definitiva)
2014
Língua
Inglês
País
Estados Unidos da América
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N.º de citações: 2

(Última verificação: 2024-03-20 19:01)

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Abstract/Resumo
Although credit ratings are meant to foretell a firm’s risk of default, anecdotal evidence suggests that they actually influence the firm’s probability of default. This paper reports systematic evidence on some unintended effects of rating downgrades on future credit defaults. Based on complementary causality methodologies and using an extensive database of long-term corporate obligation ratings issued by Moody’s, S&P and Fitch, from 1990 to 2012, the paper shows that downgrades crossing the threshold between investment grade and speculative grade may cause an increase of at least 3% in the 1-year probability of default. The increase in the probability of default seems to be stronger for deeper rating downgrades. The effect is also likely to be stronger for firms that already have a low initial rating.
Agradecimentos/Acknowledgements
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Palavras-chave
Treatment effect models; Forecasting; Information; Credit rating agencies; Corporate default