The Effect of Solicitation and Independence on Corporate Bond Ratings

Martin Feinberg, Roger Shelor and James Jiang

Journal of Business Finance & Accounting, 2004, vol. 31, issue 9‐10, 1327-1353

Abstract: Abstract: This comparison of solicited and independent bond rating agencies performance reveals that the ratings assigned by Moody’s and Standard & Poor’s are consistently lower than those assigned by Duff and Phelps and Fitch IBCA and are consistently higher than those assigned by MCM. While Moody’s and S&P generally downgrade bond ratings sooner than Duff and Phelps and Fitch IBCA, the four major agencies upgrade at the same time. Moody’s tends to have a higher upgrade magnitude than Duff and Phelps, but the downgrade magnitudes do not differ. MCM upgrades its ratings more quickly than either Moody’s or S&P. The results give support to the timeliness and accuracy of ratings provided by the independent agencies.

Date: 2004
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