Tightening Credit Standards: Fact or Fiction?
Over the latest twenty years, the average credit rating of U.S. corporations has trended down. This observation has been interpreted as evidence that rating agencies have been tightening credit standards. More formally, Blume et al. (1998) model the credit rating process by an ordered probit regression and indeed find that the annual intercept, reflecting the average credit rating, has been drifting down, holding the effect of other variables constant. We extend the analysis in several ways. First, we find that this trend does not apply to speculative-grade issuers. Second, we account for structural shifts in investment-grade issuers that could rationally explain this decrease in ratings. Explanations include a shift away from utilities, which are generally less risky than other industries, increasing volatility of market values, and increased manipulation of accounting data. We find that the informativeness of accounting data decreased and that earnings management increased for investment-grade firms, but not for speculative-grade firms. After accounting for all of these effects, we find that the intercept remains stable for both samples, thus providing no support for the view that rating agencies have tightened their credit standards.
credit rating agencies credit standards accounting information credit risk
Philippe Jorion Charles Shi Sanjian Zhang
Graduate School of Management University of California at Irvine, Irvine, CA 92697 Graduate School of Management University of California at Irvine, Irvine, CA 92697-3125
国际会议
西安
英文
1-38
2006-07-17（万方平台首次上网日期，不代表论文的发表时间）