Abstract

http://ssrn.com/abstract=2230915
 
 

References (42)



 
 

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Does Rating Analyst Subjectivity Affect Corporate Debt Pricing?


Cesare Fracassi


University of Texas at Austin

Stefan Petry


University of Melbourne - Department of Finance; Financial Research Network (FIRN)

Geoffrey A. Tate


University of North Carolina Kenan-Flagler Business School; National Bureau of Economic Research (NBER)

June 30, 2015

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
We find evidence of systematic optimism and pessimism among credit analysts, comparing contemporaneous ratings of the same firm across rating agencies. These differences in perspectives carry through to debt prices and negatively predict future changes in credit spreads, consistent with mispricing. Moreover, the pricing effects are the largest among firms that are the most opaque, likely exacerbating financing constraints. We find that MBAs provide higher quality ratings; however, optimism increases and accuracy decreases with tenure covering the firm. Our analysis demonstrates the role analysts play in shaping investor expectations and its effect on corporate debt markets.

Number of Pages in PDF File: 56

Keywords: Analysts, Credit Ratings, Credit Spreads

JEL Classification: G24, G32, G02, G12


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Date posted: March 11, 2013 ; Last revised: July 2, 2015

Suggested Citation

Fracassi, Cesare and Petry, Stefan and Tate, Geoffrey A., Does Rating Analyst Subjectivity Affect Corporate Debt Pricing? (June 30, 2015). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2230915 or http://dx.doi.org/10.2139/ssrn.2230915

Contact Information

Cesare Fracassi
University of Texas at Austin ( email )
Red McCombs School of Business
1 University Station B660
Austin, TX 78712
United States
Stefan Petry
University of Melbourne - Department of Finance ( email )
Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Geoffrey A. Tate (Contact Author)
University of North Carolina Kenan-Flagler Business School ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


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