Informational Efficiency of Credit Ratings

31 Pages Posted: 23 Sep 2022

See all articles by Nidhi Aggarwal

Nidhi Aggarwal

Indian Institute of Management (IIMU), Udaipur

Manish Singh

Indian Institute of Technology Roorkee

Susan Thomas

xKDR Forum; Jindal Global University

Date Written: August 18, 2022

Abstract

The timeliness of the credit rating of a firm has been frequently called into question over the previous two decades. This paper examines whether changes in credit ratings can be updated more frequently than at the frequency of updates in the accounting data. The paper finds that, when market equity prices of firms are readily available, changes in high frequency measures such as the Distance to Default, along with low frequency firm characteristics such as ownership structure and accounting data, can provide a more timely update on the probability of credit ratings downgrades.

Keywords: Merton model, event study analysis, logit regressions

JEL Classification: G21, G24, G32

Suggested Citation

Aggarwal, Nidhi and Singh, Manish and Thomas, Susan, Informational Efficiency of Credit Ratings (August 18, 2022). Available at SSRN: https://ssrn.com/abstract=4216283 or http://dx.doi.org/10.2139/ssrn.4216283

Nidhi Aggarwal

Indian Institute of Management (IIMU), Udaipur ( email )

Mohanlal Sukhadia University Campus
Udaipur, Rajasthan 313001
India

Manish Singh

Indian Institute of Technology Roorkee ( email )

Department of Humanities and Social Sciences
Roorkee, UT Uttarakhand 247667
India

HOME PAGE: http://https://hs.iitr.ac.in/

Susan Thomas (Contact Author)

xKDR Forum ( email )

38, Patrakar CHS, Gandhi Nagar road no 5
Bandra East
Mumbai, IN India 400 051
India
00919821230385 (Phone)

Jindal Global University ( email )

Sonepath, Haryana, 131001
India

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