Analyst Promotions within Credit Rating Agencies: Accuracy or Bias?

49 Pages Posted: 8 Aug 2016

See all articles by Darren J. Kisgen

Darren J. Kisgen

Boston College - Carroll School of Management

Matthew G Osborn

Cornerstone Research

Jonathan Reuter

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2016

Abstract

We examine whether credit rating agencies reward accurate or biased analysts. Using data collected from Moody’s corporate debt credit reports, we find that Moody’s is more likely to promote analysts who are accurate, but less likely to promote analysts who downgrade frequently. Combined, analysts who are accurate but not overly negative are approximately twice as likely to get promoted. Further, analysts whose rating changes are more informative to the market are more likely to get promoted, unless their ratings changes cause large negative market reactions. Moody’s balances a desire for accuracy with a desire to cater to its corporate clients.

Suggested Citation

Kisgen, Darren J. and Osborn, Matthew G and Reuter, Jonathan, Analyst Promotions within Credit Rating Agencies: Accuracy or Bias? (August 2016). NBER Working Paper No. w22477, Available at SSRN: https://ssrn.com/abstract=2819863

Darren J. Kisgen (Contact Author)

Boston College - Carroll School of Management ( email )

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Matthew G Osborn

Cornerstone Research ( email )

1000 El Camino Real
Menlo Park, CA 94025-4327
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202-912-8905 (Phone)

HOME PAGE: http://https://www.cornerstone.com/

Jonathan Reuter

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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