Ratings as Predictors of Default in the Long Term:an Empirical Investigation

Koresh Galil ()

No 505, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: The quality of external credit ratings has scarcely been examined. The common thesis is that the rating firms’ need for reputation and competitiveness in the rating industry force rating agencies to provide ratings that are efficient with respect to the information available at the time of rating. In this paper I use survival analysis to test the quality of S&P corporate ratings in the years 1983-1993 with respect to prediction of default in the long term. I provide evidence that with this respect ratings could be improved by using publicly available information such as provision of collateral, leverage and size.

Keywords: Credit Risk; Credit Rating; Corporate Bonds; Survival Analysis (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 G20 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:0505

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