The myth of tightening credit rating standards in the market for corporate debt

Karolina Krystyniak and Viktoriya Staneva

Journal of Banking & Finance, 2024, vol. 162, issue C

Abstract: This study revisits the existing evidence of a downward trend in credit rating standards indicating that Credit Rating Agencies (CRAs) have become more conservative over time. We find that the time-series variation in the proxy for rating standards is mostly driven by the market-based variables in the model, specifically market capitalization and idiosyncratic volatility. We examine an alternative specification of the model, incorporating risk characteristics of rated firms relative to those of the average firm in the economy, and find it to have a higher explanatory power. Most importantly, we find little evidence of increased conservatism over time, in contrast to prior studies.

Keywords: Credit ratings; Credit rating standards; Credit rating agencies; Default risk (search for similar items in EconPapers)
JEL-codes: G24 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426624000426
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:162:y:2024:i:c:s0378426624000426

DOI: 10.1016/j.jbankfin.2024.107122

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().