Baghai, Ramin P., Seraves, Henri and Tamayo, Ane 
ORCID: 0000-0001-7154-0221
(2014)
Have rating agencies become more conservative? Implications for capital structure and debt pricing.
Journal of Finance, 69 (5).
1961 - 2005.
ISSN 0022-1082
Abstract
Rating agencies have become more conservative in assigning corporate credit ratings over the period 1985 to 2009; holding firm characteristics constant, average ratings have dropped by three notches. This change does not appear to be fully warranted because defaults have declined over this period. Firms affected more by conservatism issue less debt, have lower leverage, hold more cash, are less likely to obtain a debt rating, and experience lower growth. Their debt spreads are lower than those of unaffected firms with the same rating, which implies that the market partly undoes the impact of conservatism on debt prices. This evidence suggests that firms and capital markets do not perceive the increase in conservatism to be fully warranted
| Item Type: | Article |
|---|---|
| Official URL: | https://onlinelibrary.wiley.com/journal/15406261 |
| Additional Information: | © 2014 American Finance Association |
| Divisions: | Accounting |
| Subjects: | H Social Sciences > HF Commerce > HF5601 Accounting H Social Sciences > HG Finance |
| Date Deposited: | 02 Feb 2018 10:38 |
| Last Modified: | 12 Dec 2024 00:47 |
| URI: | http://eprints.lse.ac.uk/id/eprint/86628 |
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