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Lagged accuracy in credit-risk measures

Isabel Abinzano, Ana Gonzalez-Urteaga, Luis Muga and Santiago Sanchez

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: This paper analyzes the magnitude (accuracy) and length (time) of the lag in the incorporation of new information in different measures of credit risk. The results, for US firms, show a lag for Altman's Z accounting measure and credit rating. In contrast, market-based credit-risk measures such as CDSs and the Black-Scholes-Merton model show no lag. This paper also analyzes the determinants of the lags found showing the importance of the informativeness of CDSs in reducing the lag for all types of default events, and a negative relationship between accounting manipulation and the lag of Altman's Z for severe default events.

Keywords: Credit-risk measures; Accuracy; Lag; Hard-to-value stocks; Accruals; CDS informativeness (search for similar items in EconPapers)
JEL-codes: G32 G33 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005845

DOI: 10.1016/j.frl.2021.102653

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