Analyst changes and credit ratings

28 Pages Posted: 7 Aug 2019 Last revised: 6 Feb 2021

See all articles by Kilian Dinkelaker

Kilian Dinkelaker

University of St. Gallen

Andreas Walter Mattig

University of St. Gallen

Stefan Morkoetter

University of St. Gallen - School of Finance; University of St.Gallen / St.Gallen Institute of Management in Asia

Date Written: August 1, 2019

Abstract


We investigate the effect of credit analyst changes on long-term ratings of S&P 500 issuers between 2002 and 2015. We find that analyst changes are associated with a higher probability of rating changes during first two quarters following such a change. In contrast to the argumentation of rating agencies, our results show that rating processes are prone to the influence of individual analyst behavior. Analyst changes are also associated with lower credit ratings. However, this lowering effect is limited in terms of economic magnitude. Our results empirically inform policies requiring mandatory credit analyst rotation.

Keywords: rating agencies, credit ratings, credit analysts, rotation policy, analyst bias

JEL Classification: G14, G24, G28

Suggested Citation

Dinkelaker, Kilian and Mattig, Andreas Walter and Morkoetter, Stefan, Analyst changes and credit ratings (August 1, 2019). University of St.Gallen, School of Finance Research Paper No. 2019/11 , Available at SSRN: https://ssrn.com/abstract=3432963 or http://dx.doi.org/10.2139/ssrn.3432963

Kilian Dinkelaker (Contact Author)

University of St. Gallen ( email )

Switzerland

HOME PAGE: http://www.unisg.ch

Andreas Walter Mattig

University of St. Gallen ( email )

Rosenbergstrasse 52
CH-9000 St. Gallen, 9000
Switzerland

Stefan Morkoetter

University of St. Gallen - School of Finance ( email )

111 Amoy Street
Singapore, 069931
Singapore

University of St.Gallen / St.Gallen Institute of Management in Asia ( email )

111 Amoy Street
Singapore, 069931
Singapore

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