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Creditworthiness risk over years: The evolution of credit rating standards
Author(s) -
Cafarelli Alessandro
Publication year - 2020
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.22461
Subject(s) - credit rating , issuer , bond credit rating , actuarial science , credit enhancement , credit reference , business , credit score , accounting , credit risk , credit history , economics , finance
The last financial crisis has increased the attention into the business of credit rating agencies. In this paper, I investigate the evolution of credit rating standards to measure if rating agencies have moved to different standards over years. First, I present a rating regression model where I employ specific explanatory variables to measure how they impact on ratings outcome. Next, I examine long term issuer credit rating from 1985 to 2013 to analyze how the credit rating agencies have modified their standards over years. I focus on the dynamics of the time variable and I find credit rating agencies strengthen their standards over years since they assign more conservative issuer ratings, holding the companies stable characteristics.