Reconsidering Corporate Ratings

Bertrand Hassani () and Xin Zhao ()
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Bertrand Hassani: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Xin Zhao: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper, a new corporate ratings methodology is proposed. In this innovating approach corporate ratings are calibrated from data with different frequency in two-steps. Information of firms' credit quality from annual accounting ratios and daily credit derivative spreads yields are combined through a Bayesian approach. To test the performance of this new rating, an empirical analysis is carried out on a sample of 197 public traded international corporations with credit ratings from the big-three credit rating agencies. The ratings generated from the presented approach perform better than the ratings from the external agencies as it is more representative of companies' credit quality over time, therefore this approach is a suitable alternative to internal rating methods.

Keywords: Corporate Rating; market implied rating; corporate Bond Yields (search for similar items in EconPapers)
Date: 2014-10
Note: View the original document on HAL open archive server: https://hal.science/hal-01117683
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Published in 2014

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01117683

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