Do Credit Ratings Reflect Private Information about SEC

• 成果类型: Article
• 署名作者: Bonsall VI, Samuel B.; Donovan, John B.; Holzman, Eric R.; Wang, Xue; Yang, Daniel G.
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; University of Notre Dame; Indiana University System; IU Kelley School of Business; Indiana University Bloomington; University System of Ohio; Ohio State University; Hong Kong University of Science & Technology
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2021-0560
• 发表日期: 2025
• 页码: 21-44
• 关键词: CORPORATE GOVERNANCE; Bond ratings; agencies; moodys

摘要

Despite private access to managers, issuer-paid credit rating agencies (CRAs) are often criticized for failing to promptly reflect material negative private information in their ratings and being ineffective corporate watchdogs. We utilize a novel dataset of private SEC investigations to examine the timeliness and informativeness of CRAs' rating adjustments in response to material negative private information. Our evidence suggests that CRAs adjust ratings downward within a quarter following the opening of an SEC investigation. Moreover, these adjustments are over three times larger for those investigations that ultimately yield an enforcement action than for those that do not, suggesting that CRAs quickly form sophisticated expectations about the materiality of the private information. Additionally, rating downgrades during the investigations are more informative to the stock market than other rating downgrades. Overall, our evidence suggests that CRAs reduce information asymmetry in the capital markets by timely incorporating material private information in their ratings.