A Closer Look at Credit Rating Processes: Uncovering the Impact of Analyst Rotation

Dinkelaker, Kilian; Mattig, Andreas Walter; Morkoetter, Stefan

doi:10.2139/ssrn.3432963

A Closer Look at Credit Rating Processes: Uncovering the Impact of Analyst Rotation

University of St.Gallen, School of Finance Research Paper No. 2019/11

41 Pages Posted: 7 Aug 2019 Last revised: 16 Aug 2019

See all articles by Kilian Dinkelaker

Stefan Morkoetter

University of St. Gallen - School of Finance

Date Written: August 2019

Abstract

We investigate the effect of credit analyst rotation in the context of long-term ratings of S&P 500 issuers between 2002 and 2015. We find that analyst rotation in the coverage of issuers is associated with higher rating activity and a lower credit risk assessment (e.g., rating downgrades) following the appointment of a new credit analyst. Our results provide empirical support for policies relating to mandatory credit analyst rotation programs.

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

JEL Classification: G14, G24, G28

Suggested Citation: Suggested Citation

Dinkelaker, Kilian and Mattig, Andreas Walter and Morkoetter, Stefan, A Closer Look at Credit Rating Processes: Uncovering the Impact of Analyst Rotation (August 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