More than a Letter: Evidence on the Determinants and Impact of Credit Rating Report Content

58 Pages Posted: 24 Jan 2021 Last revised: 15 Nov 2021

See all articles by Florian Kiesel

Florian Kiesel

Grenoble Ecole de Management

Darren J. Kisgen

Boston College - Carroll School of Management

Date Written: November 12, 2021

Abstract

We document large variations in information contained in rating reports, distinct from the letter rating. We examine the readability, length, numerical content, uncertainty, and uniqueness of Moody’s rating reports. We find that individual analyst style explains about 20% of content variation, reports provide more information for larger, more complex, and better rated firms, and rating bias influences content. Additional evidence indicates that information contained in reports significantly improves with litigation risk due to the Dodd-Frank Act. Finally, we show that the stock market reaction is significantly affected by rating content and that rating content predicts future rating changes.

Keywords: Credit ratings, Regulation, Analysts, Informational Content, Textual analysis

JEL Classification: G01, G14, G24, G28

Suggested Citation

Kiesel, Florian and Kisgen, Darren J., More than a Letter: Evidence on the Determinants and Impact of Credit Rating Report Content (November 12, 2021). Available at SSRN: https://ssrn.com/abstract=3723861 or http://dx.doi.org/10.2139/ssrn.3723861

Florian Kiesel (Contact Author)

Grenoble Ecole de Management ( email )

12 Rue Pierre Semard
Grenoble, Cedex 01 38000
France

Darren J. Kisgen

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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