Analyst distance and credit rating consistency

Marc Altdörfer, Andre Guettler and Gunter Löffler

Journal of International Money and Finance, 2024, vol. 143, issue C

Abstract: In this paper, we investigate the effect of analyst distance on the assignment of credit ratings and show that issuers with analysts located in more distant offices obtain more conservative ratings than issuers with analysts located closer. Our results are robust to an analyst home bias and suggest that more distant analysts are subject to an informational disadvantage when conducting their rating analysis. Given an asymmetric reputational cost function that penalizes an overestimation of credit quality more heavily than an underestimation, assigning more conservative ratings is a rational response to the higher levels of information uncertainty that a greater distance can entail.

Keywords: Credit ratings; Analyst distance; Home bias; Default risk; Analysts (search for similar items in EconPapers)
JEL-codes: G15 G24 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:143:y:2024:i:c:s0261560624000421

DOI: 10.1016/j.jimonfin.2024.103055

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