Reconsidering Corporate Ratings

Bertrand K. Hassani (bertrand.hassani@gmail.com) and Xin Zhao (xinzhao0617@gmail.com)
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Bertrand K. Hassani: Grupo Santander et Centre d'Economie de la Sorbonne, http://centredeconomiesorbonne.univ-paris1.fr
Xin Zhao: Morgan Stanley et Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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)
JEL-codes: C23 E44 G15 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014-10
New Economics Papers: this item is included in nep-acc and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:14077

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