Reconsidering Corporate Ratings

33 Pages Posted: 30 Jun 2015

See all articles by Bertrand Hassani

Bertrand Hassani

Université Paris I Panthéon-Sorbonne; University College London - Department of Computer Science

Xin Zhao

Université Paris I Panthéon-Sorbonne

Date Written: July 2015

Abstract

In this paper, a new corporate ratings methodology is proposed. The information from the annually accounting ratios and the daily credit derivative spreads are combined through a two‐steps approach to calibrate the credit risk of the corporations. To test the performance of the proposed rating methodology, an empirical analysis is carried out on a sample of 197 public traded 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. This rating method provides an approach to integrate the long term and short term information of corporate credibility.

Suggested Citation

Hassani, Bertrand and Zhao, Xin, Reconsidering Corporate Ratings (July 2015). Economic Notes, Vol. 44, Issue 2, pp. 177-209, 2015, Available at SSRN: https://ssrn.com/abstract=2624788 or http://dx.doi.org/10.1111/ecno.12036

Bertrand Hassani (Contact Author)

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

University College London - Department of Computer Science ( email )

United Kingdom

Xin Zhao

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

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